Goldman Sachs: Cross Likely Range-Bound For Now

Goldman Sachs note that they "recently revised AUD/USD and NZD/USD forecasts higher to maintain a constructive view on both crosses following the rally at the end of August. Our expectations for higher commodity prices and a continued recovery in global growth over the medium-term should support both currencies, in our view, even if domestic factors currently point to growing downside risk. The coronavirus outbreak in Victoria - and the current Melbourne lockdown - remains a key headwind to higher conviction AUD longs, while the RBNZ's guidance on negative rates should continue to keep NZD contained over the near-term (although we think rates would be a cleaner expression for an earlier-than-expected move). We continue to favor AUD over NZD on relative monetary policy expectations and the former's greater exposure to the China recovery, but a resumption of the rise in AUD/NZD likely requires a stronger risk backdrop, better virus containment in Australia, and/or increasingly explicit concern at the RBNZ around stronger NZD levels. We are therefore sticking with our AUD/NZD target of 1.10 for now."