NZD/USD recovery headed back towards 200 dma or still bearish?

NZD/USD is flat in a quiet start to the week where expectations are for business to pick up on the back of key events in the US calendar at least.

NZD/USD has been at the mercy of the greenback and the sentiment around a Trump presidency coming to fruition in 2017 that is expected to see government fiscal stimulus to propel the economy forward within a new Republican administration. 

The kiwi, in its own right, has stabilized on a relatively robust economy in New Zealand of late, but this week, in the absence of key NZ data, the focus remains with the US economy as we head towards the final nonfarm payrolls before the long await FOMC meeting in the middle of the month. The Fed is expected to hike and that has been priced into the dollar, thus some are calling for a sell-off regardless of whether the Fed hike or not. The jobs data will come out at the end of the week in the ADP and nonfarm report while the GDP is also a key event for the week ahead while observers are expecting a more robust recovery in H2 to enable the Fed to continue pursuing a normalisation of rates in 2017. 

NZD/USD levels

With spot just 40 pips below the 200 dma at 0.7095, analysts at Westpac offered an outlook for the day ahead and further out as follows:

"NZD/USD 1 day: The stalled US dollar allows strong economic fundamentals to come to the fore. Targets 0.7070+ today.

NZD/USD 1-3 month:  The US dollar has had an impressive rise since the US election and has potential to rise further, not least because the Fed will probably hike in December. Against that, the NZ economy is strong and dairy prices have risen. Overall we are left with a bearish outlook for NZD/USD, targeting sub-0.70. Technicals suggest as low as 0.66 could be seen, courtesy of the head-and-shoulders break below 0.7080."