NZD/USD: Potential to correct to around 0.71 - Westpac

NZD/USD’s six-week old rally came to a halt in early July, giving way to a shallow correction so far and has potential to run further to around 0.71 during the week ahead, according to Imre Speizer, Research Analyst at Westpac.

Key Quotes

“Key negatives at present are the stretched long positioning (unseen since 2014); and overbought technicals. A 50% retracement of the May/June rally would take it to 0.7080.”

“From a fundamental perspective, next week’s inflation report will be pivotal. A decent pullback would surprise both the market and the RBNZ (which has forecast a 2.0% yoy result).”

“Longer term, we expect to see NZD/USD lower at 0.68, based NZ-US interest rate spreads narrowing to zero.”