AUD/NZD: Fade The Rally Targeting A Move Back To 1.05
AUD/NZD is likely to see a relative rapid reversal of its recent gains on the ground of its divergences from underlying fundamentals, argues BNP Paribas FX Strategy.
“AUDNZD tends to track short-end (2-year) rate spreads between Australia and New Zealand very closely. The recent AUDNZD spike has pushed the FX cross far beyond levels signalled by spreads, while the rate differential has now peaked and is starting to fall,” BNPP notes.
As such, BNPP recommended selling AUD/NZD via options targeting a return to 1.05 over the coming weeks.
AUD/NZD is trading circa 1.0972 as of writing.