AUD/NZD: Short-term squeeze an attractive opportunity to sell (Nomura)

"The lift in the New Zealand unemployment rate in Q4 2016 triggered a squeeze higher in AUD/NZD. We do not see this is a start of a new trend – the relative macroeconomic factors remain in favour of NZD.

Inflation impulses in New Zealand are stronger and the next Reserve Bank of New Zealand (RBNZ) move looks to be a rate hike (albeit in 2018).

Conversely, the weak price pressures in Australia and our below-consensus growth outlook leads us to expect another Reserve Bank of Australia (RBA) rate cut in August. The narrower real Australia-New Zealand 2yr swap spread should limit AUD/NZD rebounds, in our opinion.

We believe downside AUD/NZD structures offer attractive opportunities."