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NZD/USD: Kiwi Holds Gains Amid Risk-On Session
A huge leap in risk-on sentiment helped support the so-called kiwi on Monday, sending it back above the $0.71 handle against the greenback.
Market confidence was boosted by weekend polls which put the 'Remain' camp ahead of 'Leave' voters just days before Britain is set to vote in the EU referendum.
Gobal equities rallied, commodity prices rose, and riskier currencies - including the New Zealand dollar - also gained.
The NZD/USD traded 0.91% higher at $0.7109 on Monday afternoon in New York, having closed last week at $0.7055.
NZD/USD: Kiwi Tinkers With $0.70 Handle Amid Brexit Backlash
The New Zealand dollar fell sharply against the greenback on Monday as markets continued to discard riskier currencies following last week's UK referendum result.
Almost 52% of Britons voted to leave the European Union (EU) on Thursday, sparking risk-off trading since.
"The fallout from the “Leave” vote continued, with falling equity markets, lower commodity prices, a tumbling GBP and a weaker NZD," BNZ currency strategist Jason Wong said in a note.
The NZD/USD fell 1.61% to 0.7005 on Monday afternoon in New York from 0.7132 when markets closed on Friday, but traded as low as 0.6980 earlier on Monday.
"Remarkably the NZD is still more than 3% higher than where it began the month so we believe that the potential downside from here is still material," said Wong.
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NZD/USD forecast for the week of July 4, 2016
The NZD/USD pair initially fell during the course of the week but found the 0.70 level below to be supportive enough to turn things back around. Because of this, it looks as if we could continue to grind higher but there was a shooting star from the previous week that could make this a very choppy market indeed. Because of this, I am going to prefer short-term charts over the long-term ones. The breaking of the top of the shooting star from the previous week would be an extraordinarily bullish sign though.
NZD/USD Technical Analysis: Bulls in Control
The NZD/USD edged lower from session highs at $0.7191, was still was trading with a bullish sentiment.
The so-called kiwi tracked the Australian dollar lower on Monday's open, as NZD/USD saw a slight bearish gap down open of around 12 pips.
The pair then resumed the upside, to hit session highs of $0.7191 with the intraday bias remaining higher.
The 5-day moving average at $0.7126 is an immediate support on the downside, ahead of $0.7120 and then $0.7085.
On the upside, immediate resistance is seen at $0.72, ahead of $0.7223 and then $0.7255.
New Zealand's treasury in its latest monthly report on the economic indicators on Monday, said that the impact of Brexit on the NZ economy is uncertain, but is not considered likely to be significant, at least in the short term.
With US markets closed today on account of US independence day, a lower trading volume is expected.
Focus is also on the NZIER Business Confidence data, along with the GDT price auction both due on Tuesday.
NZD/USD: Kiwi Soars as Sentiment Slightly Improves
The kiwi was bid on Thursday and rose sharply, with the NZD/USD pair trading around $0.72 during the London session, booking a 1.28% gain so far.
Sentiment improved marginally on Thursday as European stocks are expected to open in positive territory, although the USD/JPY pair remained offered, which suggests that equities might do the same after the opening bell.
In the previous session, traders digested a batch of US data. The US services PMI for June ticked marginally higher to 51.4 points, while the non-manufacturing ISM jumped to 56.5 points in June, from 52.9 scored in the fifth month of the year.
Moreover, the Federal Open Market Committee minutes from the latest June meeting were released and showed that the Federal Reserve (Fed) was in no hurry to raise rates further, with governors leaving the fed funds rate 0.25 - 0.50% due to the possible Brexit chaos.
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NZD/USD forecast for the week of July 11, 2016
The NZD/USD pair initially fell during the course of the week, but turned right back around to form a massive green candle. With this being the case, the market looks as if it is ready to break out and continue to go much higher. I believe that short-term pullbacks will continue to be buying opportunities in the longer-term uptrend that we are starting to see in the New Zealand dollar. With this, I am very bullish of this pair and recognize that the market has changed to the upside.
Kiwi Loses Steam as Traders Mull RBNZ's Next Move
The interest rate outlooks for New Zealand and Australia continue to be a key mover for the AUD/NZD pair, and with markets now less sure of the Reserve Bank of New Zealand's (RBNZ) next move, the aussie has gained some pace on the kiwi.
Until last week when RBNZ Deputy Governor Grant Spencer gave a speech on housing market risks, the market was pricing in more than a 60% chance of a 25 basis points cut in August, but since then pricing has dropped to around 36%.
Specifically, markets focused on the part of Spencer's speech where he said further interest rate cuts could pose a risk to financial stability and that those risks would need to be carefully considered.
Following the speech, ANZ bank changed their prediction to 'no change' in rates in August, although they still see 50 basis points of further easing which is they expect to be announced in 2017.
The decline in market pricing for an August cut last week helped drive the AUD/NZD to a 15-month low of 1.030 on Friday, however, the pair has since recovered, which BNZ currency strategist Jason Wong says is consistent with their belief that the market over-reacted to Spencer's speech last week.
The AUD/NZD traded at 1.0435 on Tuesday morning in Wellington, up 0.7% from where the pair closed in New York on Friday.
In contrast to New Zealand's rate outlook, markets continue to price in a 60% chance of a 25 basis points rate cut by the Reserve Bank of Australia (RBA) in August, although all eyes are on Australia's Q2 CPI report due at the end of July for confirmation that more easing is required to get inflation back within the RBA's target range.
Martina Song of Westpac's Global Strategy Group says the relative interest rate outlook will continue to be a key driver for the AUD/NZD until August when both central banks meet.
"Westpac expects rate cuts from both [the RBA and RBNZ] in August and we should see AUD/NZD head towards the 1.00-1.02 area in the short term," Song said in a note. "The threat of a ratings downgrade in Australia will also keep a lid on the Aussie. However, with AUD/NZD well under fair value, multi-month the pair should recover to 1.06."
Ratings agencies Moody's and S&P have both warned that Australia's credit rating could be downgraded if the newly formed government fails to push through new reforms to lower Australia's budget shortfall.
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