From the latest Westpac "High Conviction FX Trades"

AUD and NZD ... our model, macro and technical signals pushing strongly back in their favour

Aussie's domestic fundamentals are strong

  • Fading pricing for an RBA easing
  • Steady growth
  • Diminished terms of trade drag (Australia's commodity export price basket at its highest levels since Nov 2014)

New Zealand:

  • Activity remains strong across almost all sectors
  • Confidence among businesses and consumers is high
  • Dairy sector is seeing green shoots (pace of price gains remains more muted)

Westpac's model "goes long NZD in a big way, +26.8% of the portfolio"

  • Against the USD, NZD suffers from a declining interest rate advantage, likely to narrow even more
  • We remain upbeat on the USD
  • Buying NZD/CHF thus seems to be the safer bet, our process much more negative CHF than USD (see table below).
  • We buy NZD/CHF at 0.7080, stop 0.6995

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In brief, the banks "High Conviction Trades" blends recommendations from our G10 FX quant model, macro analysis and technical analysis.