NZD/USD: 0.7220 level is critical - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that the NZD/USD has hovered in the 0.7220-0.7330 zone for over a week in the absence of major events to break it free but this week there are at least two events which could do just that, but they present different directions.

Key Quotes

“First, the GDT dairy auction on Tuesday is currently priced by WMP futures to show a tiny 1% rise, which really means it could go either way. The previous auction was a major disappointment, so markets will be braced for a repeat. Second, the US payrolls report in Friday is expected to show a rise of 170k jobs. However, it often underwhelms in September, which means the USD risks a fall (boosting NZD/USD).

Technically, the 0.7220 level is critical. A break below that would imply a further fall to around 0.6950.

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.”