NZD Under Pressure Ahead Of The Elections – What’s Next?

The New Zealand dollar is under pressure from all sides and against many currencies. What’s in store for NZD/USD and AUD/NZD? Here are several opinions:

Here is their view, courtesy of eFXnews:

NZD: A Sell On Rallies Ahead Of A ‘Perfect Storm’ – ING

ING FX Strategy Research argues that NZD/USD is a sell on rallies ahead of ‘perfect storm’ of rising yields & political risks.

“With speculative markets still significantly net long NZD and signs of any political risk premium yet to reach extreme levels, we suspect a narrower focus on the 23 Sep elections could spell further weakness for NZD

A US data-led recovery in $ sentiment could see NZD/$ temporarily undershoot our 0.71 forecast for 3Q17 – with a break of the 200-DMA (0.7130) supporting this view.

Even worse, under a “perfect storm” of rising DM yields and greater domestic political uncertainty, we think NZD/USD could drop towards the 0.68-0.69 lows seen in 2017. Our view is that NZD looks a sell on rallies,” ING argues.

NZD: AUD/NZD Divergence Trade Has Room To Extend Further – Nomura

Nomura FX Strategy Research argues that NZD is likely to remain on the back foot, with outgoing RBNZ Governor Wheeler repeating the bank’s view that a lower currency “is needed”.

In particular, Nomura thinks that NZD under-performance is likely to more expressed against AUD.

“The divergence in the underlying momentum of the respective economies, adjustment in the ratio of commodity price baskets and shift in market sentiment over the medium-term outlook for monetary policy in Australia should keep AUD/NZD supported.

On the AUD side, the partial data released so far point to a decent pick-up in Q2 GDP (released 6 September), and we think the RBA should continue to sound confident about the outlook but convey no urgency about raising rates,” Nomura argues.

NZD: Market Appetite For NZD Long Likely Limited Ahead Of NZ General Election – Barclays