AUD/NZD: antipodean outlook - Westpac

Ross J Burland FXStreet

Analysts at Westpac offered an outlook for the antipodean cross and rates.

Key Quotes:

"AUD/NZD 1 day: (1.0520) Consolidation around 1.05 may well be forming a base for a retest of 1.0565-70 and a potential push towards 1.0650-60 is to be building

AUD/NZD 1-3 month: Higher to the 1.0650-1.0770 area, mainly for valuation reasons. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. However we acknowledge the AUD’s higher sensitivity to China news, as well as Australia’s AAA downgrade risk, any such action likely to delay any return towards fair value during the next few months. (16 Dec)

AU swap yields 1 day: The 3yr and 10yr should open around 2.17% and 2.98%, driven by US rise.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open at 2.45%, the 10yr at 3.47%, also following US.

NZ swap yields 1-3 month: The RBNZ ended its easing cycle on 10 Nov and will remain on hold for a long time. That will anchor the short end somewhat (although the 2yr-OCR spread – one measure of stretchedness – could rise further given historical precedents) with the long end free to follow offshore yields. The curve steepening trend should continue."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

BNB prolonged correction signals deeper bearish momentum

BNB (BNB), formerly known as Binance Coin, is trading below $618 on Wednesday, marking the sixth consecutive day of correction since the weekend. The bearish price action is further supported by rising short bets alongside negative funding rates in the derivatives market.