Buy AUD/NZD on easier positioning, RBA urges

Investing.com – Forex traders should consider buying the Australian dollar versus the New Zealand dollar, according to Bank of America Securities, citing different interest rate expectations.

At 07:45 ET (11:45 GMT), it traded up 0.1% to 1.0869, down just under 1% over the past week and down nearly 2.5% over the past month.

“We recommend buying AUD/NZD at 1.0877, targeting our year-end forecast of 1.13 with a stop-loss at 1.07, just below the June lows,” analysts at BoA Securities said in a note dated August 28.

The relative outlook for monetary policy remains unchanged – the Reserve Bank of New Zealand is likely to make two more rate cuts this year, while the Reserve Bank of Australia is unlikely to cut until 2025, the bank said.

Australian CPI inflation in July was above consensus, the BoA added, and reinforces its belief that the RBA will maintain its recent dovish rhetoric at a time when the market is still pricing in a rate cut by the end of the year.

AUD/NZD’s decline over the past month was primarily driven by positioning, analysts added, as the volatility shock in early August led to a broad resumption of crowded trading, but AUD/NZD continued to be shielded as much even after this episode. , and positions were likely extended after the dovish RBNZ on August 14.

“Positioning is a risk for this trade, but it has probably eased and we have a stronger belief that the 1.0850 uptrend channel support will hold,” BoA said.

Another risk is if the USD sell-off continues, as it tends to be a better deal when the USD weakens due to weaker liquidity, which ultimately affects AUD/NZD.

Weak commodity demand from China is also a risk, although AUD/NZD tends to be less sensitive to China sentiment than .