AUD/NZD: Pullback seen as chance to re‑enter longs – TD Securities

TD Securities remains constructive on AUD/NZD, viewing recent weakness as a correction within an ongoing uptrend. The bank cites supportive 2‑year rate differentials, its high-frequency fair value model showing the Australian Dollar undervalued versus the New Zealand Dollar, and a relatively more hawkish RBA path. They favour outright bullish exposure and suggest 3‑month seagull structures for diversification.

Uptrend intact with valuation and rates support

"AUD/NZD weakness looks like a positioning correction; valuations, 2y rate spreads, and a more hawkish RBA support a resumption of the uptrend."

"Investors who look to trade FX crosses with less sensitivity to Middle East tension should consider AUD/NZD. We see recent AUD/NZD weakness more as a short-term pullback from overbought territory rather than a reversal of the uptrend. The 2y rate differential continues to favor higher AUD/NZD."

"Our HFFV (high-frequency fair value) model also shows AUD as undervalued vs NZD at current level. On the back of the global rates selloff, markets now price around 3 more rate hikes in 2026 for both the RBA and RBNZ."

"We see the RBNZ rate hike pricing as overdone vs the RBA, given Australia's labor market remains much more robust. Dovish commentary from RBNZ's Governor Breman this week further supports this view whereas we expect the RBA to continue rate hikes at its next meeting in May."

"We remain bullish AUD/NZD on the back of valuation, central bank outlook, and expectation for a resumption of the year-to-date uptrend. 3m seagull structures in AUD/NZD could serve as a cheap diversification of FX"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)