NZD/USD: down to key support at 0.6616
- NZD/USD on the defensive still as dollar comes up king on suffering emerging markets.
- A dip in the greenback will be short-lived and a probable bargain vs the lesser yielding antipodeans.
NZD/USD has been on the defensive due to the resurgence of the dollar in the main today, but indeed, and without doubt, the bird is suffering tremendously due to the RBNZ's uber dovishness portrayed throughout yesterday's announcements and presser that followed the RBNZ's OCR up-dates to their forecasts. Currently, NZD/USD is trading at 0.6619, but that is up from the 0.6608 fresh lows that were recently scored.
NZD/USD was wallopped yesterday and fell from 0.6757. Analysts at ANZ explained that the latest reiteration from the RBNZ that it is still a long way away from tightening (and perhaps could even ease further) has shone a brighter light on the shift in New Zealand’s yield structure relative to the rest of world:
"The entire NZGB curve is now trading through its US equivalent, and we are not far away from that being the case against Australia too. Even though the NZD at around 0.66 is now below the bottom end of our short-term fair value estimate range, we think this yield structure story increases the odds of an undershoot and likely outweighs any lingering positivity from elevated commodity prices."
NZD/USD holds little value in holding long
Indeed, the bird holds little value in holding while rates are now higher in the US and set to keep going higher which has shifted the antipodeans to the back of the queue - well almost to the back. The emerging markets are being slammed and that has propelled the dollar higher towards the end of the week, sending the Kiwi even lower.
The next key event will come in the US CPI which is coming up in the US session which could again be a factor that widens the Kiwi/US spread in favour of the greenback. In fact, even in the event CPI negatively surprises, a dip in the greenback will be short-lived and a probable bargain vs the lesser yielding antipodeans.
CPI review - TDS
Analysts at TD Securities, (TDS) gave their review for US July CPI as follows:
"We expect headline CPI to hold steady at 2.9% y/y in July, reflecting a 0.2% m/m increase and likely marking the peak in y/y inflation for the year. Gasoline prices will lift headline CPI on a y/y basis, but should be offset by some deceleration in food inflation as we eye continued weakness in the latter. Core CPI inflation should hold steady at 2.3% y/y on a third consecutive 0.2% m/m increase. We expect a firm increase to be underpinned by a pickup in core goods along with sustained strength in shelter costs."
NZD/USD levels
0.6616 was traded and eyes now look further out to 0.6550 that guards a run to the 0.6470s o a break of 0.6510. On the flipside, the Key resistance is 0.6670 and then, on the wide, 0.6860. Should bulls manage a breakthrough recent highs and the top of the channel, there with daily closes, 0.6920 as the June high comes as a key level. The 200-month moving average resistance is at 0.7020.