NZD/USD: Higher Highs and Lows Pattern Broken - Westpac
Imre Speizer, Senior Market Strategist at Westpac, suggests that the
NZD/USD’s second attempt at 0.7050 last week again failed and gave way
to a slump to the 0.6800 area.
“It also broke a pattern of higher highs and lows which had been in place since Feb, and now raises the chances of a move to 0.6700 during the weeks ahead. The RBA’s surprise rate cut has been influential, as has been the shift in market attitude towards the US dollar (its multi-month decline was starting to look stretched).
NZ’s data calendar is devoid of market movers this week, leaving NZ markets at the mercy of offshore news. For the record, there’s electronic retail spending (Tue), REINZ housing data (Wed), manufacturing PMI and food prices (Thu), and Q1 retail sales volume (Fri).
3 months: We retain our long-held view that NZD/USD will decline this year, but we have raised our mid-year target to 0.65. The basis for our view remains a combination of a looser RBNZ and a tighter Fed. That view has so far been hurt by a Q1 soft patch for the US economy, as well as a surprisingly cautious Fed. We expect the former to show an improvement in Q2, and the latter to hike once this year (in September). If these play out as expected, NZD/USD should decline. A major risk to our view is the Fed behaving in a more hesitant manner than expected.
1 year: Our economic fundamentals based forecast is 0.62.”