Stay Short AUDNZD Ahead of RBA

As the relative strength index on the AUDNZD continues to find resistance around the 57 figure, the pair appears to be carving a near-term top around 1.2400, and I will stick to the short from 1.2350 going into the Reserve Bank of Australia (RBA) interest rate decision as the central bank continues to see scope to lower benchmark interest rate further. Indeed, RBA Governor Glenn Stevens may show a greater willingness to push the cash rate to a fresh record-low amid the slowing recovery in the $1T economy, and we may see the central bank carry out its easing cycle throughout 2013 in an effort to stem the downside risks for growth and inflation. According to Credit Suisse overnight index swaps, market participants now see the RBA lowering the cash rate by 50bp over the next 12-months, and we will maintain a bearish forecast for the AUDNZD amid the deviation in the policy outlook.

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