Annual Forecast for AUD/NZD (2021): More Bullish Runs Ahead

The reserve banks of Australia (RBA) and New Zealand (RBNZ) have both published slightly pessimistic outlooks for 2021, which in turn, would affect the Aussie and Kiwi.

The AUD/NZD, which represents the value of the Australian dollar in terms of the Kiwi, is rounding off the year higher than it began amid plummeting global equity and energy prices. That said, the Aussie had a healthier year compared to the NZD.

Meanwhile, both the RBA and the RBNZ have cut their interest rates this year. The RBA has cut its short-term target from +0.75% to +0.25%, while the New Zealand bank cut its rates from +1.00% to +0.25%.

The AUD is the riskier of both currencies, which means it tends to benefit more from positive risk sentiment and suffers more in negative risk markets than the NZD. However, the factor that would likely keep supporting the AUD in 2021 is the size of the Australian economy.

In 2018, New Zealand’s GDP was at US$205 billion, while Australia’s figures came in at a whopping US$1.43 trillion—about seven times larger than that of New Zealand’s. That said, a larger economy typically intensifies FX swings—which provides the underlying currency with immense liquidity and demand—compared to a smaller one.

With all that in mind, it remains somewhat unclear what the future holds for both currencies individually, considering the risks surrounding the commodities, energy, and equity markets, amid the COVID-19 pandemic. Nonetheless, 2021 looks more favorable for the AUD over the NZD.

AUD/NZD Value Forecast — 2021

AUD/NZD 2021 Bias: Bullish

Supply Levels: 1.1000, 1.1200, and 1.1300

Demand Levels: 1.0550, 1.0400, and 1.0200

Despite having a choppy year, the AUD/NZD is rounding off better than it started the year. Already, the prospects for 2021 (from a technical perspective) seems very bullish for the pair, considering that it bounced off the base of our ascending channel in early December and is now on its way to the top of the channel.

That said, our highest expectation for the AUD/NZD in 2021 stands at 1.1300 (a six-year-strong resistance), while our lowest price expectation for the new year is 1.0000 (the lowest-ever recorded price).

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