Market outlooks for the antipodeans: losing energy - Westpac

Analysts at Westpac offered market outlooks for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  The sharp reversal overnight suggests 0.7500 will be tough to break. Neutral today, between 0.7500 and 0.7630.

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: A technical “outside-up” reversal yesterday gives it a more neutral tone today, towards 0.7150.

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: A technical “outside-down” reversal yesterday suggests a correction of the month-old rally is likely here, initially to 1.0640.

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 around 1.75% and 2.31%

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 down 1bp at 2.04%, the 10yr unchanged at 2.61%.

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."