NZD/USD: Resuming multi-week downtrend, targeting 0.7035 - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that NZD/USD appears to be resuming its multi-week downtrend, targeting 0.7035 during the week ahead.

Key Quotes

“There’s not much in the NZ event calendar to ruffle markets (only Sep trade data on Wed) so that offshore events will dominate, particularly those affecting the US dollar which has appreciated 4% during the past month. The US dollar index has been, both statistically and economically, a more significant variable than interest rates, commodities or risk sentiment during the past year. In the US advance Q3 GDP is the main release, consensus looking a touch high at 2.5% vs the more accurate Atlanta Fed model at 2.0%. Against that surveys point to a stronger Q3 employment cost index. New & pending home sales and a bunch of surveys are on tap too.

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. A middle scenario is the Fed hike in Dec is a “dovish” one, signalling little further tightening ahead, which would result in limited NZD/USD downside.

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