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21 Aug 2015
NZD/USD a top performer, but for how long?
FXStreet (Guatemala) - NZD/USD is currently trading at 0.6682 with a high of 0.6694 and a low of 0.6606.
NZD/USD a top performer this week
NZD/USD has been a top performer this week, relishing in the weakness of the greenback, but this may be a last valiant effort before the RBNZ next month while 0.6800 remains a key resistance and some way off in the distance. 0.7200 thereafter would be the next land mark and would indicate the unthinkable, that the bird could be headed back to the RBNZ's overvalued status.
FOMC minutes allow the bird to drift higher
The FOMC minutes have put a dark cloud over the greenback with a dovish tone, which is setting back ideas of a rate hike from the Fed as soon as September. The next data to watch out for next week will be the durable goods orders from the US along with US GDP revisions to Q2, which should be positive for the dollar, and should be supportive of a positive Q3 on the handover.
China weighing on the Fed's timing
However, China should continue to weigh on the global outlook, but more specifically, the greenback may have further to unwind should the notion be that a timing of rate hike is not appropriate in the given circumstances, where we have already seen a blow out in the EM markets and a collapse in stock markets as the PBoC devalued the Yuan by 2% which is damaging to Asian exporters. On that basis, the NZD may find a follow through of the trade-off with the dollar unwinding and 0.6800 would be back in the picture, tempting the hand of the RBNZ.
On the other hand, the greenback may attract a flight to safety over time while US stocks may seem like a safe place again in an environment where the Fed stay on hold for longer, relieving the corporate sector of ultra low costs for the foreseeable future and buoying the market. That, coupled with a soft commodities sector, would weigh on the bird considerably.
Commodities to keep the bird weak and RBNZ on the back-foot
Jane Foley, Senior Currency Strategist at Rabobank explained that, "Weak energy prices and slow growth is keeping a lid on inflationary pressures and with currencies such as the AUD and the NZD coming down from overvalued levels, the drop in their values has been generally welcomed by policymakers."
She added, "Given that supply gluts means that producers are facing up to the risk of low for longer commodity prices and that a weaker CNY threatens to erode competitiveness, we see risk that the RBA and RBNZ could take further action this year to weaker their currencies and we see falls to AUD/USD0.69 and NZD/USD0.62 on a 12m view."
NZD/USD a top performer this week
NZD/USD has been a top performer this week, relishing in the weakness of the greenback, but this may be a last valiant effort before the RBNZ next month while 0.6800 remains a key resistance and some way off in the distance. 0.7200 thereafter would be the next land mark and would indicate the unthinkable, that the bird could be headed back to the RBNZ's overvalued status.
FOMC minutes allow the bird to drift higher
The FOMC minutes have put a dark cloud over the greenback with a dovish tone, which is setting back ideas of a rate hike from the Fed as soon as September. The next data to watch out for next week will be the durable goods orders from the US along with US GDP revisions to Q2, which should be positive for the dollar, and should be supportive of a positive Q3 on the handover.
China weighing on the Fed's timing
However, China should continue to weigh on the global outlook, but more specifically, the greenback may have further to unwind should the notion be that a timing of rate hike is not appropriate in the given circumstances, where we have already seen a blow out in the EM markets and a collapse in stock markets as the PBoC devalued the Yuan by 2% which is damaging to Asian exporters. On that basis, the NZD may find a follow through of the trade-off with the dollar unwinding and 0.6800 would be back in the picture, tempting the hand of the RBNZ.
On the other hand, the greenback may attract a flight to safety over time while US stocks may seem like a safe place again in an environment where the Fed stay on hold for longer, relieving the corporate sector of ultra low costs for the foreseeable future and buoying the market. That, coupled with a soft commodities sector, would weigh on the bird considerably.
Commodities to keep the bird weak and RBNZ on the back-foot
Jane Foley, Senior Currency Strategist at Rabobank explained that, "Weak energy prices and slow growth is keeping a lid on inflationary pressures and with currencies such as the AUD and the NZD coming down from overvalued levels, the drop in their values has been generally welcomed by policymakers."
She added, "Given that supply gluts means that producers are facing up to the risk of low for longer commodity prices and that a weaker CNY threatens to erode competitiveness, we see risk that the RBA and RBNZ could take further action this year to weaker their currencies and we see falls to AUD/USD0.69 and NZD/USD0.62 on a 12m view."