Is AUD/NZD a runaway train that has left the station?
Westpac seems to think so, as the firm argues for a more bullish case in AUD/NZD based on their baseline that the RBNZ will switch to negative rates in Q2 2021. Adding that markets have this only 20% priced in by May.
They see the pair moving to 1.11 from current levels and then to 1.14 some months from now. Though noting that the risk is that the next Australian jobs report in August could show some "collateral damage from the south" - referring to the Melbourne lockdown.
The firm also retains a more bullish view on both the aussie and kiwi against the dollar, noting that a weaker greenback is a significant component in their bullish multi-quarter aussie and kiwi outlook in general.
There's certainly a good argument here considering that the RBA is almost certainly less willing to go down a similar path that the RBNZ is taking right now.
If anything, the RBA will surely not be as explicit about pursuing such unconventional monetary policy and that presents a general tailwind for AUD/NZD to push higher.
Giles also made a similar argument for that earlier today here.
From a technical perspective, breaking above daily resistance from the 7 November high now opens the path towards 1.1000 with little in the way of buyers from aiming towards the August 2018 high @ 1.1175 potentially.
The fundamental argument just adds a tailwind to that and gives buyers more conviction to step back in, should there be any further dips down the road.
