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5 May 2015
Long AUD/NZD, target 1.0740 - ANZ
FXStreet (Barcelona) - With RBA cutting rates today and RBNZ maintaining an easing bias, Daniel Been, Senior FX Strategist at ANZ, raises the target for his long AUD/NZD trade.
Key Quotes
“Last week the RBNZ opened the door, shifting to an easier bias. It said that “It would be appropriate to lower the OCR if demand weakens, and wage and price setting behaviour settle at levels lower than is consistent with the inflation target”.”
“Today, while the RBA eased rates, its statement was interpreted slightly more hawkishly than the one the market was expecting. In particular the market focussed on the fact that in its final paragraph the RBA highlighted the “recent encouraging trends in household demand”.”
“While we do not think that this has been a shift away from an easing bias by the Bank, it is clear that the hurdle to further rate cuts is higher, and that the RBA has become more data contingent. Ie if the trends in retail sales continue to improve, cuts will not manifest.”
“All in all this suggests that the ‘bias differential’ is narrowing and that AUD/NZD should continue to perform well. As such we raise our stop on the trade to 1.0330 and also raise our take profit level to 1.0740.”
Key Quotes
“Last week the RBNZ opened the door, shifting to an easier bias. It said that “It would be appropriate to lower the OCR if demand weakens, and wage and price setting behaviour settle at levels lower than is consistent with the inflation target”.”
“Today, while the RBA eased rates, its statement was interpreted slightly more hawkishly than the one the market was expecting. In particular the market focussed on the fact that in its final paragraph the RBA highlighted the “recent encouraging trends in household demand”.”
“While we do not think that this has been a shift away from an easing bias by the Bank, it is clear that the hurdle to further rate cuts is higher, and that the RBA has become more data contingent. Ie if the trends in retail sales continue to improve, cuts will not manifest.”
“All in all this suggests that the ‘bias differential’ is narrowing and that AUD/NZD should continue to perform well. As such we raise our stop on the trade to 1.0330 and also raise our take profit level to 1.0740.”