NZD/USD: Switch from a positive to a neutral bias - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the month-old NZD/USD rally has stalled, responding to some hawkish comments from the Fed on Friday.

Key Quotes

“We thus switch from a positive to a neutral bias for the week ahead, with the next major catalyst likely to be the US payrolls report this Friday. Meantime, we have a 0.7200- 0.7350 range, with a break outside that signalling the next major move.

NZ data this week holds little market-moving potential: ANZ business sentiment (Wed), Q2 terms of trade (Thu) and Q2 value of building work (Fri). More interesting will be US payrolls (Fri): after averaging +274k the last 2 months, Aug payrolls will surely ease back to more “casual” pace nearer the 12mth average of 204k. That would be well above market expectations of 180k, and could put upward pressure on the USD.

3 months: We target 0.70, based on an assumption the Fed will hike in Dec and the RBNZ will cut in November and possibly again after that. 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.”