AUD/NZD bulls expecting an opportunity on dimming kiwi sentiment

With the Thanksgiving holidays in the rearview mirror, attention is now focussed on month-end and the inevitable rebalancing flows that it brings. 

However, for the cross, markets are going to start wondering how much of an advantage the kiwi can maintain over the Aussie.  

Risk appetite has remained strong while investors continue to look through the rising covid cases and towards a light at the end of the tunnel. 

Commodity markets remain well bid, but both the Aussie and kiwi have been benefitting, although the kiwi really took off in November, scoring a new high on Friday, riding the Reserve Bank of New Zealand sentiment.

Meanwhile, metals, in particular, had a big week and copper added an additional 1.39% Friday at $7,505, up 3% on the week and iron ore marked a 6-year high above $130 as Chinese port inventory dropped for another week to hit the lowest since late October, bonding well for the Aussie, especially considering the disputes over other commodities, such as coal. 

Bank to the RBNZ, there will be a focus on how much has already been priced into the kiwi now.

Last week, the kiwi benefitted further on the back of a letter by NZ Grant Robertson to the RBNZ.

Robertson asked the central bank to consider surging house prices in monetary policy decisions, toning down the expectations of RBNZ rate cuts.

The positioning data, which is currently stretched vs the greenback, will be a useful tool in establishing the mood of the market behind the bird going forward and how to apply it to the cross, AUD/NZD.

''Range trading after volatility last week. We think the NZD eventually softens against the AUD, but can’t see a near-term catalyst,'' analysts at ANZ bank explained. 

There is nothing to note on the calendar for the kiwi this week, and instead, attentions will with a busy week full of Aussie events, starting with the Reserve Bank of Australia and then Gross Domestic Product.

 Governor Philip Lowe will deliver a speech to the Parliament Economic Committee the following day. 

''We doubt there will be any surprises to digest in the RBA statement. The Bank will confirm it stands ready to provide additional easing if required. More interest in Lowe's parliamentary testimony,'' analysts at TD Securities explained.

''For Gross Domestic Product, see upside risks to the RBA's 1.75% QoQ average increase in both Q3 & Q4 to meet the Bank's Dec'20 GDP forecast. Consumption, Dwelling Inv, Govt, Inventories to add to GDP.''

For the day ahead, we have the November manufacturing PMI and non-manufacturing PMI which analysts at Westpac said will be supported by the resurgence of domestic and external demand.