A brief look at the NZD and what could impact it from the Reserve Bank of New Zealand this week, from Westpac:
- NZD/USD finally ran out of steam at 0.7550.
- Speculative longs are at a five year high – very stretched.
- In addition, we have the RBNZ MPS this Thursday, which could pour some cold water over the kiwi.
- Economic data since the previous MPS argues for a lower OCR track, and the elevated NZD could see the RBNZ ramp up its currency warning.
- The immediate (technically derived) downside target is 0.7350, with a break below possible if the RBNZ is dovish enough.
Three months ahead:
- Our medium term outlook for NZD/USD is largely dependant on the outlook for the US dollar. A persistent rebound in the US dollar by year end is needed to pull NZD/ USD back to the 0.69 area. On that score, last week’s jobs data-inspired USD bounce is encouraging
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