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ANZ expects lower NZD/USD

NZD/USD slid below $0.8600. Kiwi weakened as inflation in New Zealand declined to 1.5% in Q1 from 1.6% in the previous 3 months. Last month the Reserve Bank of New Zealand increased the benchmark interest rate from the record low and said that it will continue to tighten monetary policy to curb inflation. However, lower inflation reduces the pressure to further rate hikes. This creates fundamental reason for lower NZD.

According to ANZ, NZD/USD will return to $0.83/82. The analysts say that although the pair may still retest $0.8845 (2011 high) the broader bias is for a break of the near-term uptrend: “Further momentum divergence on moves above $0.8700 can be considered as triple divergence (peaks since late March occurred with lower momentum). This underscores both the maturity of the rally and increasing risks of corrections, even though the uptrend has yet to be broken.” Support is at $0.8560, $0.8500 and $0.8430.

Chart. Daily NZD/USD

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