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NZD/USD: Multi-month decline could run slightly further - Westpac

NZD/USD remains under downward pressure as there has been some dissipation of the election-related discount, and the USD rally has stalled, but 0.6820 looks vulnerable to a retest as NZ-US interest rate spreads reach 17- year lows, according to analysts at Westpac.

Key Quotes

“NZD/USD shifted from a fairly valued state to 6% undervalued during the period capturing the polls, election, and ultimate government formation. During the past few weeks, though, the undervaluation has receded to 4%.”

“Futures speculators have flipped from an extremely long state to a moderately short one, worth watching in case it becomes extreme (which would warn of a rebound).”

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