TD Securities maintains a constructive outlook on the AUD/NZD currency pair, interpreting the recent weakness as a short-term correction within an ongoing uptrend rather than a reversal [1]. The bank highlights several supportive factors, including the 2-year rate differential, which continues to favor higher AUD/NZD, and its high-frequency fair value model indicating that the Australian Dollar is undervalued relative to the New Zealand Dollar at current levels [1].
According to TD Securities, the global rates selloff has led markets to price in approximately three additional rate hikes in 2026 for both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) [1]. However, the bank views the RBNZ rate hike pricing as excessive compared to the RBA, citing Australia's more robust labor market and dovish commentary from RBNZ Governor Breman this week as further support for their position [1]. TD Securities expects the RBA to continue rate hikes at its next meeting in May [1].
For investors seeking FX trades with less sensitivity to Middle East tensions, TD Securities recommends considering AUD/NZD, emphasizing that the recent pullback is likely a correction from overbought territory [1]. The bank remains bullish on AUD/NZD based on valuation, central bank outlook, and the expectation of a resumption of the year-to-date uptrend. They suggest 3-month seagull structures in AUD/NZD as a cost-effective way to diversify FX exposure [1].
CONCLUSION
TD Securities views the recent AUD/NZD weakness as a temporary correction and maintains a bullish outlook, supported by rate differentials, valuation models, and central bank expectations. Investors are encouraged to consider AUD/NZD for diversification, with the uptrend expected to resume. The market takeaway is positive for AUD/NZD, with medium impact driven by central bank policy and valuation factors.