Antipodeans could take a hit

Antipodeans could take a hit. Favor buying GBP against AUD and NZD

The following levels are anticipated in the GBP/AUD – currently at 0.9512 and GBP/NZD – currently at 2.028 pairs-

• GBP/AUD could rise to 1.9650-1.97 levels in the short-term. Daily close below 0.9450 could be bearish

• GBP/NZD could rise to 2.04-2.046 levels in the short-term. Strong support at 2.01

The Australian Dollar and the New Zeland dollar could see renewed selling pressure in the days ahead as China announced a lower GDP target for 2015. The country also plans to run the biggest fiscal deficit in 2015, although reaction in the AUD/USD and NZD/USD suggests markets are not impressed.

Chinese government announced a growth target of around 7% for this year; considerably lower than the 7.5% goal in 2014.

Why Antipodeans could suffer?

The Aussie is the most vulnerable currency when it comes to a slowdown in China. The Reserve Bank of Australia (RBA) refrained from reducing the interest rates earlier this week. However, the bank maintained that it could reduce interest rates in coming months. The markets are likely to take the dovish guidance more seriously, now that China has lowered its 2015 GDP target considerably.

The New Zealand dollar , too, stands to lose, although the Kiwi is likely to outperform the Australian dollar. Fonterra’s Global Dairy Trade auction got-off to a solid start this year as concerns of a slowdown in the dairy production increased. The Fonterra auction has started to strengthen because the volumes of milk being offered for sale have contracted significantly over the recent weeks. The overall diary prices are expected to see modest increases in the future, which is likely to see the NZD outperform the AUD.

The bearish effect of a lower growth target in China could be amplified further by a better-than-expected February non-farm payrolls in the US tomorrow. After the recent testimony by the Fed chair Janet Yellen, it seemed like the June rate hike is off the table. However, the USD index has inched higher to 96.19, which can be partly attributed to non-US factors. Still, the 10-year yields sit comfortably above 2.10%, while the 2-year yield is above 0.65%, which indicates markets lack conviction that the interest rate hike would be delayed. Thus, a better-than-expected US NFP report tomorrow could lead to a sharp depreciation in the AUD/USD and NZD/USD pair.  The US is expected to have added 241K jobs, slightly lower than the previous month’s 257K gain. The jobless rate is projected to fall from 5.7% to 5.6% for that period while average hourly earnings could see a mere 0.2% uptick.

Buy British Pound against Antipodeans

However, there is always a possibility of a big-miss on the NFP data. In such a case, the short AUD/USD and short NZD/USD trades may not work well. Hence, it is preferable to buy GBP/AUD and GBP/NZD pairs as the Bank of England, at the moment, is the second most hawkish central bank after the US Federal Reserve.

In case the US data disappoints, the British Pound is likely to outperform other major currencies, leading to a rise in the GBP/AUD and GBP/NZD pair. Meanwhile, the gains in the AUD and NZD could be relatively less due to concerns of a slowdown in China, even if the NFP disappoints market expectations.