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NZD/USD: Break of 0.77 exposes 0.70 - Westpac

FXStreet (Bali) - According to Imre Speizer, FX Strategist at Westpac, NZD/USD is expected to re-visit the 0.7709 recent low this week, with a break lower targeting the mid 0.70s during the next few months.

Key Quotes

"We expect the 0.7709 recent low to be revisited this week. Should it break, we would target the mid 0.70s during the next few months."

"The US dollar has resumed its uptrend with some vigour. US economic data continue to surprise to the upside and the Fed has repeated its intention to hike rates next year. In contrast, another major central bank - the BOJ - expanded its QE program, boosting USD/JPY to a seven-year high. At the same time, NZ’s inflation rate and commodity prices have been surprisingly weak, and we don’t expect that to change during the next quarter or two."

"At some point during the next few weeks there is potential for US data to start disappointing, our model of US surprises signalling as much last week (Chart 2). However, until such disappointment manifest themselves, we will remain bullish towards the USD and thus bearish NZD/USD."

"The NZ data calendar’s key event will be Q3 labour data (Wed). The market focuses on the unemployment rate, which we estimate improved to 5.4%, but also worth watching regarding RBNZ monetary policy is wage inflation, the Labour Cost Index estimated to be unchanged at 0.6% qoq. The only other release of note is the QV house price report (Thu). There is a dairy auction on Tuesday which will be watched for any signs of a bottom."

"The US data calendar is busy and includes Oct payrolls, the services and manufacturing ISM surveys, midterm Congressional elections and a bunch of Fed speakers including Evans, Fisher, Kocherlakota, Lacker, Rosengren and Mester. Jobless claims in the 270-280k range point to solid payrolls comfortably north of 200k while regional Fed surveys are mostly constructive for the ISM too."

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