The firm expects the kiwi to consolidate above seven-month lows as traders await key risk events this week
The firm’s foreign exchange and rates strategist, Sandeep Parekh, argues that NZD/USD is likely to be supported around the high 0.6400 level but notes that market positioning indicates expectations for a further decline. Adding that there is some overhang from last week’s selling and futures are also net short of the New Zealand dollar.
Parekh also sees the New Zealand GDP data on Thursday as being key as it will determine if the kiwi will extend its losses considering how little markets have priced in anything ahead of the upcoming RBNZ meeting. Of course, not forgetting that beforehand we’ll get the FOMC meeting and that will also play a major role for risk and the kiwi in general.
Looking at the chart, the real risk for the kiwi here is that we see a less dovish Fed and a poor GDP report to follow. That will certainly threaten the October 2018 low at 0.6425 considering that the OIS market has only priced in a ~18% probability of the RBNZ cutting rates on its 26 June meeting.