AUD/NZD: eyes on break of 1.0388 / 1.0515 range

AUD/NZD has been playing into the hands of the Bears for the best part of 2017 so far. The bird is garnering support with positive prospects in the solid and growing economy. However, the main reason behind the rise in the Kiwi is through the greenback which is having a poor year to date and a market too keen to price in bullish rhetoric for the US economy.

Forex today: dollar mixed in risk-off tone ahead of key week

In respect to the performance of the economy in NZ though, we will have the highlight of the NZ data calendar this week is Q1 GDP.  "We expect a rebound from a temporarily weak Q4, a 0.8% q/q pace (from 0.4%) and a 2.8% y/y pace (from 2.7%). Less market-moving data includes Q1 BoP (Wed), REINZ house prices, and manufacturing PMI (Fri)," explained analysts at Westpac. The Australian dollar also has a busy schedule with it jobs data this week and coupled with the FOMC, it could be quite a volatile setting for the FX space in general. 

"May job creation would have to be very strong for markets to stop leaning towards (albeit only slightly) another rate cut.•Iron ore prices are also proving softer and for longer than we had been expecting. It’s another busy data week, with May employment the highlight (Thu 15th). Also on the slate are Apr home loans (Fri), May NAB business confidence (Tue) and Jun Westpac consumer sentiment (Wed)," explained analysts at Westpac.

Westpac's 3 months AUD/NZD Outlook 

Fair value for the cross has risen to around 1.0869, following this year’s sharp decline in iron ore prices. "We see that as a fair target for the remainder of 2017. Potentially supports for the AUD include the Chinese authorities’ eagerness to counter the negative headlines over Moody’s sovereign downgrade. In addition, the strength of steel reinforcing bar (rebar) prices suggests iron ore should eventually play catch-up."

AUD/NZD levels

AUD/NZD has been making a minor recovery from 1.0388 and scored a high of 1.0515 on the 6th June. A break of that level opens 1.0594 and the 1.06 handle for next key resistance at 1.0640. To the downside, below the 1.04 handle, 1.0319 and 1.0220 are key targets on the wide.