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JGB TECHS

(Z1) Bearish Trend Condition

AUSSIE 10-YEAR TECHS

(Z1) Bearish Price Sequence

AUSSIE 3-YEAR TECHS

(Z1) Off Recent Highs

US 10YR FUTURE TECHS

(Z1)‌‌ Support Appears Exposed

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The psychological barrier at NZ$1.0500 briefly gave way for the first time since early December, as AUD/NZD sank in reaction to New Zealand's Q2 labour market statistics. Subsequent revisions to sell-side RBNZ views added pressure to the pair, which now trades -38 pips at NZ$1.0502.

  • AUD/NZD bears look for a clean break below NZ$1.0500, before setting their sights squarely on Dec 1, 2020 low NZ$1.0418, which represents the previous cycle trough. The next layer of support is provided by NZ$1.0396, the 61.8% retracement of the Mar 18, 2020 - Aug 18, 2020 rally. The recent formation of a death cross bodes well for the bearish case. Bulls need to reclaim Jul 29 high of NZ$1.0618 to get some reprieve.
  • AUD/NZD implied 2-week volatility (which now covers the next RBNZ MPS) has surged to 5.65%, its highest point in a month.
  • All of the "big 4" New Zealand Banks now look for 3x 25bp hikes from the RBNZ during the remainder of '21. That equates to a 25bp hike at each of the remining 3 meetings. The OIS strip currently prices ~67bp of tightening over the same horizon.
  • The previously flagged hawkish RBNZ repricing in the wake of the latest NZ labour market data has added fresh tightening pressure to the Australia/New Zealand 2-Year swap spread, resulting in yet another multi-year low for that differential.

Fig. 1: Australia/New Zealand 2-Year Swap Spread (%)

Source: Bloomberg