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We are starting this week with new NZD/USD sell orders. One of our core views this week is NZD weakness. When the RBNZ last met, they refused to acknowledge the improvements in the economy at the time and instead warned that “uncertainties remain and policy may need to adjust.” They didn’t feel that the pickup in inflation was durable as there is no evidence of accelerating wage growth. Since then we’ve seen a lot of unevenness in New Zealand’s economy and that combined with a stronger currency should keep the RBNZ cautious, leading to a top in the overbought NZD. We have chosen to sell NZD vs. USD because Fed President Dudley spoke this morning and his optimism + hawkishness brought new life to the greenback. This should have additional continuation as investors leverage his comments for direction.
Technically, there is a lot of resistance in NZD/USD at 73 cents. The currency flamed out at this level twice this month and appears prime for a deeper move below 72 cents. There’s some support at 0.7230 but once that breaks, NZD/USD could slip as low as 0.7150, where the 50% Fib of the Sept 2016 to May 2017 sell-off & 20-day SMA converge