Market outlook for the antipodeans - Westpac

Analysts at Westpac offered their market outlooks for the antipodeans. 

Key Quotes:

"AUD/USD 1 day:  Las week’s decline has stalled, leaving the AUD in a more neutral state today. We suggest a 0.7550-0.7650 range.

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: Daily momentum remains negative, Friday’s 0.7110 low vulnerable.

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: The rally since mid-Sep accelerated overnight, 1.0750 the next target area (8 Aug high). Australian commodity prices have outperformed NZ’s since mid-Sep, providing fundamental justification.

AUD/NZD 1-3 month: Higher to 1.0750 or above, 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. (11 Oct)

AU swap yields 1 day: The 2yr and 10yr should open higher, led by global yield gains, to 1.75% and 2.34%

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 2.10%, the 10yr up 3bp at 2.65%.

NZ swap yields 1-3 month: Slightly lower for the 2yr. 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)."