The Aussie has been in focus last week with a marathon of data on both the domestic front as well as from China. The latest data came in Retail Sales which was another disappointment adding to the speculation that a cut will come early next year.
Regardless of the direction of trade-related risk sentiment, the less and less dovish stance of the RBNZ keeps denting the AUD-NZD rate differential, and the commodity outlook appears more positive for New Zealand than Australia. When adding NZD extreme short positioning compared to AUD, we think AUD/NZD can break below the 1.04 level in the near future and soon approach the 1.0350 August lows.
Trade talks on track
Meanwhile, on the trade deal front, there has been good news of late and the confirmation from Beijing that indeed trade talks are on track helped risk apatite to improve into the end of this week.
Firstly, US President Donald Trump who said that the US is having meetings and discussions with China, describing the meetings as ‘going well’ and said that “something could happen regarding 15th Dec tariffs, but we are ‘not discussing that yet’.
Late in the day, a Wall Street Journal article stated that while China and the US remain at odds over the value of farm goods Beijing will buy, an official statement from Beijing had confirmed that China’s trade negotiations with the US remain on track.
China’s Commerce Ministry said last Thursday that the negotiating teams from both sides have maintained close communication, though it didn’t provide details on progress. The recent strain had spooked investors and stoked concerns over the global economic outlook.
AUD/NZD LONG (Buy)
ENTE AT: 1.04150