Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD had a good run downwards during the past two weeks and may now be entering a short period of consolidation before resuming the downtrend.
“The likely range for such a consolidation in 0.7035- 0.7220. There’s significant local event risk this week from both the Q3 CPI release and the GDT dairy auction (Tue). We expect a 0.2% increase in CPI, for an annual pace of 0.2% – similar to the RBNZ’s forecast and probably NZD-market neutral. The GDT auction is priced by futures to result in a 7% bounce in WMP prices, partly due to a weather-related fall in production. If we do get such a bounce, that would follow two disappointing auctions, and possibly ignite some NZD buying on the day. The remaining data releases are not market-movers: services PMI (Mon), migration and credit card spending (Fri).
3 months: We target 0.70, based on an assumption the Fed will hike in Dec and the RBNZ will cut in November. 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.”