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Citi Flag Potential For Tactical Downside

AUDNZD
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Tuesday saw Citi note that “since the start of 2023, AUD/NZD has been largely driven by leveraged positioning, yield dynamics, terms of trade differential and risk sentiment; these factors now suggest downside potential.”

  • “When comparing Cyclone Gabrielle to Christchurch earthquake in 2011, we find no evidence that the disaster should lead to further NZD weakening this time.”
  • “Our short-term valuation modelling using likely levels for the 2-Year yield spread, terms of trade differential and leveraged positioning indicates we should see AUD/NZD ~3% lower at NZ$1.0630 in the coming weeks.”
  • “The main risk to this view stems for the announcement of fresh Chinese growth-friendly measures in the NPC starting on 5 March.“
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Tuesday saw Citi note that “since the start of 2023, AUD/NZD has been largely driven by leveraged positioning, yield dynamics, terms of trade differential and risk sentiment; these factors now suggest downside potential.”

  • “When comparing Cyclone Gabrielle to Christchurch earthquake in 2011, we find no evidence that the disaster should lead to further NZD weakening this time.”
  • “Our short-term valuation modelling using likely levels for the 2-Year yield spread, terms of trade differential and leveraged positioning indicates we should see AUD/NZD ~3% lower at NZ$1.0630 in the coming weeks.”
  • “The main risk to this view stems for the announcement of fresh Chinese growth-friendly measures in the NPC starting on 5 March.“