NZD/USD: Break below 0.7220 signals a move to 0.6950 - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD finally broke free of its multi-week slumber, in a downward direction.

Key Quotes

“The main catalysts were a disappointing GDT dairy auction and the resurgent US dollar, helped by reports the ECB is considering tapering its QE program. In addition, while economic activity remains strong inflation is nowhere to be seen, which means the RBNZ will cut on 10 Nov. Technically, the break below a head-and-shoulders neckline at 0.7220 on 4 Oct signals a move to 0.6950 during the weeks ahead. That level coincides nicely with the low formed in July.

NZ’s event calendar is distinctly second-tier this week. REINZ housing data (exact date unspecified) will be closely watched for signs the latest set of RBNZ restrictions on lending are starting to bite. Electronic spending (Tue), manufacturing PMI, food prices and ANZ consumer confidence (all Thu) complete the week.

3 months: We target 0.70, based on an assumption the Fed will hike in Dec and the RBNZ will cut in November. However the persistent backdrop of global demand for high-yielding currencies is strong - if the Fed doesn’t hike, then 0.75+ is likely instead.

1 year: Our economic fundamentals-based forecast is 0.65.”