Outlook for antipodeans: vulnerable to downside - Westpac

Analysts at Westpac offered the market outlooks for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  Stalled above 0.7535 but remains vulnerable to further downside, led by the US dollar.

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: Stalled above 0.7045 but remains vulnerable to further downside, led by the US dollar. The next major target is 0.6950.

NZD/USD 1-3 month:  Targets 0.6950 or lower as long as the RBNZ cuts to 1.75% in November and the Fed tightens to 0.625% in December, as we expect. (13 Oct)

AUD/NZD 1 day: The uptrend remains intact but some consolidation below 1.0750 is likely before pressing on.

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 unchanged around 1.78% and 2.38%

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 2.08%, the 10yr at 2.67%.

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)."