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Forex Flash: AUD/NZD bounce seen as corrective – Westpac

FXstreet.com (Barcelona) - Westpac Bank exited their remaining half short position taken back in March 21 at 1.2560. “We entered the trade on 21 March, selling the cross at 1.2560 with a target of 1.2300,” the bank said, expanding: “On 8 April we took profit on half the position at 1.2340 and ran the balance with a trailing stop which was triggered today, taking profit on the remaining half of our short AUD/NZD position at 1.2110.”

“The trade's performance has broadly matched our expectations,” they reckon, adding: “This has, in part, reflected the divergent fundamental support for the respective currencies. NZ’s economic data pulse has outperformed Australia’s, and there has been notable commodity divergence (between iron ore and milk),” Westpac notes.

From Westpac: “Looking ahead, we remain of the view that relative fundamentals should continue to favour the NZD over the AUD over the medium term. We expect the RBA to ease further to 2.0% by early 2014, compared to the RBNZ remaining on hold at 2.50% (as long as the housing market continues to strengthen). This bounce is seen as corrective, inspired by the RBNZ's FSR today (bank capital requirements raised) as well as Governor Wheeler's confirmation of covert NZD intervention, and could go as high as 1.2300 before completion, after which the trend decline should resume to sub-1.2000,” they conclude.

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