AUD/NZD trade plan - Westpac

Analysts at Westpac offered a buy AUD/NZD trade plan as follows ...
 
Key Quotes:

"Entry: 50% at 1.0665, further 50% at 1.0580, Stop: 1.0530, Target: 1.0800.
 
Rationale:

AUD/NZD upside has been a perennial source of disillusion but the cross is nevertheless offering value for a quick tactical long trade near the bottom of its near 3-month range (1.06-1.10).

The cross has been pinned down by weakness in iron prices but an aggressive push higher in Chinese steel prices (+22% YTD and +11.8% MTD) should confer an underlying bid to iron ore prices near term.

Markets have trimmed RBNZ rate hike expectations in the wake of their neutral policy signal from their 11 May meeting but pricing remains notably more aggressive, with about two +25bp rate hikes priced in by end-2018 vs the RBNZ’s OCR projections for the first hike to come in late-2019.

The main risk near term is that rates markets continue to "defy the RBNZ", especially if this week's Budget signals a shift to a more expansionary fiscal policy (general election in September).

Last week’s short USD basket comprising 1/3 long EUR/USD, short 1/3 USD/JPY and short 1/3 USD/CAD was exited for a 1.13% return."