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Breaks Lower On Relative Data Outcomes, AU-NZ 2yr Swap Differential Still Elevated

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The AUD/NZD has broken to fresh lows going back to late June. The pair last near 1.0825. A fresh test sub 1.0800 could see earlier June lows near 1.0735 targeted. The pair is sub all key EMAs (200-day near 1.0890).

  • Today's data outcomes have worked in further of downside in the cross. Earlier NZ business survey figures were much stronger than the prior outcome. Confidence and expectations around the activity outlook surged, although the current activity backdrop was weak. We also had a dip in Q2 Australian Capex (-2.2%q/q versus +1.0% forecast).
  • The NZ ANZ activity outlook at 37 is well ahead of the NAB Australia business conditions index, which last printed at +6 (next update for this survey is Sep 10). The chart below plots the AUD/NZD cross against this relative AU-NZ business condition differential.
  • This differential does a reasonable job of coinciding with major AUD/NZD turning points and is currently arguing for much lower levels in the cross. The one caveat being the ANZ measure is the expected activity outlook.

Fig 1: AUD/NZD Cross Versus AU-NZ Relative Business Conditions

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The AUD/NZD has broken to fresh lows going back to late June. The pair last near 1.0825. A fresh test sub 1.0800 could see earlier June lows near 1.0735 targeted. The pair is sub all key EMAs (200-day near 1.0890).

  • Today's data outcomes have worked in further of downside in the cross. Earlier NZ business survey figures were much stronger than the prior outcome. Confidence and expectations around the activity outlook surged, although the current activity backdrop was weak. We also had a dip in Q2 Australian Capex (-2.2%q/q versus +1.0% forecast).
  • The NZ ANZ activity outlook at 37 is well ahead of the NAB Australia business conditions index, which last printed at +6 (next update for this survey is Sep 10). The chart below plots the AUD/NZD cross against this relative AU-NZ business condition differential.
  • This differential does a reasonable job of coinciding with major AUD/NZD turning points and is currently arguing for much lower levels in the cross. The one caveat being the ANZ measure is the expected activity outlook.

Fig 1: AUD/NZD Cross Versus AU-NZ Relative Business Conditions

Keep reading...Show less