Currency analyst

NZD/USD outlook for October 17-21

NZD/USD experienced considerable drop having reached the 0.703 mark this week as US dollar was appreciating in value on the hawkish tone of the FOMC minutes. On Wednesday, the market found out a great share of disagreement among the Fed’s members. This helped the Kiwi to spread its wings and fly to the 0.7128 mark. But we believe that this upsurge won’t last long because of the several reasons.  

Reserve Bank of New Zealand is still determined to cut interest rates to revive inflation. Although NZ economic activity is rather strong, and the NZD showed a slack in the course of last trading sessions, inflation remains stubbornly low. Next week we will get the Q3 CPI update on Tuesday. The forecasts for inflation rate – 0.0%-0.2%, it is well outside RBNZ’s target range of 1%-3%. So, it seems that further easing and NZD depreciation are inevitable. There are some additional factors that weight on the NZD/USD growth – anticipated Fed tightening in December, stalled diary prices.

Technically, the break of the 0.7163 resistance line located against the 100-day MA might pave the way towards the 0.725 mark (plotted near the 50-day MA). Alternatively, if US dollar gains momentum from J. Yellen’s speech scheduled for today, the Aussie may return to its October 13 low. If the quotes fall below the support line at 0.7032, the Kiwi might slide even further nearly reaching the 0.694 mark located against the 200-day MA.

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