NZD: Sell on rallies ahead of ‘perfect storm’ of rising yields & political risks - ING

Viraj Patel, Research Analyst at ING explains that with speculative markets still significantly net long NZD and signs of any political risk premium yet to reach extreme levels, they suspect a narrower focus on the 23 Sep elections could spell further weakness for NZD.

Key Quotes

“A US data-led recovery in $ sentiment could see NZD/$ temporarily undershoot our 0.71 forecast for 3Q17 – with a break of the 200-DMA (0.7130) supporting this view. Even worse, under a “perfect storm” of rising DM yields and greater domestic political uncertainty, we think NZD/USD could drop towards the 0.68-0.69 lows seen in 2017. Our view is that NZD looks a sell on rallies, with US payrolls creating a potential opportunity.”