Listen to the latest market mood for the AUDNZD pair.

Weak AUD, Strong NZD

Strong CPI data out of New Zealand last week has continued to help the NZD find strength. There are four reasons for NZD strength at the moment:

1. New Zealand has been very good at limiting COVID-19 cases. It reported the first case outside of a quarantine community in more than two months on the weekend.
2. Governor Orr has walked back markets from expecting negative interest rates at the last rate meeting saying there was a 100bps readjustment.
3. Kiwi Bank is the latest investment bank to think the RBNZ will no longer use negative interest rates. They join Westpac and ANZ.
4. NZ 10 Year bond yields spiked higher and are testing the 1.100 level.

The bond yield spread between Australia and New Zealand remains heavily pressured today indicating that AUDNZD sellers are ahead.

Expect AUDNZD selling from any return to the 50% Fib level marked above.

Trade Risks:

  • The main risk to this trade is from a further break out of COVID-19 in New Zealand.
  • Another risk is any comments from the RBNZ about wanting to use negative rates.
  • If the RBNZ talk about tapering bond purchases expect more selling of AUDNZD.