Market outlooks for the antipodeans - Westpac

Analysts at Westpac offered market outlooks for the antipodeans.

Key Quotes:

AUD/USD 1 day:  The 0.7700 level should give way today, fuelled by negative momentum in the US dollar.

AUD/USD 1-3 month: During the month ahead we expect further gains to around 0.78, driven in part by the faltering US dollar and yield-chasing flows. By year end, there’s a case for a correction towards 0.74 if the Fed tightens in December as we expect. (8 Sep)

NZD/USD 1 day: Continues to break higher and not yet technically stretched, above 0.7500 is on the cards. The sharp rebound in dairy prices over the past six weeks is surely a factor, in addition to the faltering US dollar and strong global capital flows.

NZD/USD 1-3 month:  During the month ahead we expect further gains into the 0.75-0.78 zone (the latter level marking a peak in April 2015). The US dollar looks vulnerable, yield-chasing flows remain strong, and NZ commodity prices are rising. By year end, there’s a case for a correction towards 0.70 if the Fed tightens in December as we expect. (8 Sep)

AUD/NZD 1 day: The cross now has an open run to 1.0200 (early April 2015 resistance).

AUD/NZD 1-3 month: During the month ahead, we expect further losses into the 1.01-1.02 zone, partly driven by a declining AU/NZ commodity price ratio. By year-end, we expect a rebound towards 1.06, the cross well below fair value implied by interest rates, commodity prices and risk sentiment.  (8 Sep)

AU swap yields 1 day: The 2yr should open at 1.62% while the 10yr should open at 2.05%.

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 unchanged at 1.99%, while the 10yr should open unchanged at 2.41%.

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).