NZD/USD is poised to fall much further - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD has fallen 3c since the US election, about the same as the immediate Brexit reaction and is poised to fall much further, technicians closely watching a neckline at 0.7060.

Key Quotes

“If that breaks, charting textbooks point to an additional 4c fall. While NZ fundamentals remain strong, the NZD will bear a risk premium linked to the threat to Asian trade volumes from the Trump win. There is also a minor headwind (so far) from today’s earthquakes, the extent of damage likely to take some time.

NZ events this week are second tier, apart from perhaps the GDT dairy auction on Tue. which is predicted by futures to result in a 5% rise in whole milk powder (WMP). Otherwise, there’s REINZ housing data, services PMI (Mon), Q3 retail sales volume (Tue), Q3 PPI (Thu) and ANZ consumer confidence (Thu).

On the US calendar, Oct retail sales and CPI and the first of the Nov PMIs Philly and Empire) are the main releases of note but we suspect 10 Fedspeak engagements along with any fresh details on Trump’s policy agenda will be the main focus this week.

3 months: We target 0.70- based on an assumption the Fed will hike in Dec. 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.”