Asia FX moves little with focus on US-China trade, dollar steadies ahead of CPI
Investing.com -- Bank of America has issued a bearish outlook on the Australian dollar versus New Zealand dollar (AUD/NZD) for this week, noting the currency pair is in a downtrend with resistance around 1.08. The bank’s CARS model shows an explicit bearish signal for AUD/NZD, while option flow data indicates broad-based investor demand for AUD puts.
Time zone analysis reveals European and Asia-based investors have consistently maintained short positions on AUD/NZD throughout this year. U.S.-based investors bought the AUD/NZD dip in May, but this demand appears to have plateaued, according to BofA’s research.
The bank identified strong Australian labor data this week as a potential risk to its bearish AUD/NZD outlook. At a slightly longer horizon, BofA also suggests investors consider fading the Norwegian krone versus Swedish krona (NOK/SEK) rally as the spot price has risen to the 200-day simple moving average.
BofA analysts note that over the past year, any upside breakout above the 200-day simple moving average for NOK/SEK quickly reversed lower within a month. The bank expects trend-followers to unwind positions below 0.97 even if the spot price briefly rises above the 200-day simple moving average.
While BofA anticipates Sweden’s Riksbank will cut its policy rate by 25 basis points and Norway’s Norges Bank will hold rates steady this week, it believes these decisions are already priced into the market. The primary risk to the bearish NOK/SEK view would be more dovish-than-expected forward guidance from the Riksbank this week.
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