Market outlook for the antipodeans: Aussie to retest 0.7600? - Westpac

Analysts at Westpac offered a market outlook for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  The trade balance poses minor event risk for the AUD today. Otherwise it looks like it wants to retest 0.7600, a resurgent US dollar the main factor.

AUD/USD 1-3 month: While further gains to around 0.77 are possible during the month ahead, driven in part by the faltering US dollar and yield-chasing flows, the AUD is losing energy (perhaps a reflection of its declining yield advantage). By year end, there’s a case for a correction towards 0.74 if the Fed tightens in December as we expect. (13 Sep)

NZD/USD 1 day: The disappointing dairy auction and resurgent US dollar caused the NZD to break below a head-and-shoulders neckline at 0.7220, and that break was sustained yesterday. The multi-week target is 0.6950, which coincides with the low formed in July.

NZD/USD 1-3 month:  Vulnerable to breaking below 0.7220 towards 0.6950 if the RBNZ cuts to 1.75% in November and the Fed tightens to 0.625% in December, as we expect. (3 Oct)

AUD/NZD 1 day: Retains upward momentum, and should consolidate above 1.0600. The next major target area is 1.0750 area.

AUD/NZD 1-3 month: A break above 1.0600 looms, the RBA likely to remain on hold this year while the RBNZ should ease further. Moreover, the cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. (3 Oct)

AU swap yields 1 day: The 2yr and 10yr should open slightly higher, led by global yield gains, to 1.72% and 2.25%

AU swap yields 1-3 month: If the RBA sits tight at 1.5% during the remainder of this year the 2yr should eventually find a base around 1.60%. However the main risk is that markets continue to price in a sub-1.5% cash rate. (15 Aug)

NZ swap yields 1 day: NZ 2yr swap rates should open 1bp higher at 2.07%, the 10yr up 2bp at 2.64%.

NZ swap yields 1-3 month: Slightly lower. The OCR is likely to be cut to 1.75% in November. That should result in a 2yr swap rate of around 1.90%, although the risk is it could be lower if markets expect a 1.5% terminal OCR. (15 Aug)"