NZD eyes key resistance level as US softness extended
Written by
Daily Currency Update
The New Zealand dollar extended its recovery on Tuesday, pushing past US$0.6150 amid broad USD weakness. Despite an absence of major headline newsflow and topline macro data US treasury yields retreated and the dollar remained on the back foot. As fears for a recession in the US fade markets begin to prepare for the commencement of the Fed’s easing cycle. The NZD surged through US$0.6125 and US$0.6150 marking intraday highs at US$0.6156. The question now is where to from here. The domestic economic outlook will likely remain soft through 2024 and we expect the RBNZ will issue at least two more rate cuts, but a focus on the Fed rebalancing and a possible 90 points of cuts into yearend USD weakness could help fuel gains up toward resistance at US$0.6220.Our attention now turns to the Federal Open Market Committee Minutes for the July Meeting while US labour market data and Japan trade data dominate a largely quiet macro ticket.
Key Movers
US softness continues through trade on Tuesday yet the Canadian dollar is the weakest of the major currencies. Canadian CPI decelerated faster than anticipated in July opening the door to additional Bank of Canada rate cuts over the rest of the year, with the market now pricing in a 25-point cut in September, October and December. With the USD and US treasuries retreating the JPY outperformed, forcing the USD/JPY to slip back toward ¥145. Bank of Japan (BoJ) research papers released yesterday highlighted the persistence of inflation in the economy and suggested the BoJ may lift rates faster than markets initially anticipated. The British pound held onto gains above US$1.30 while the euro pushed above US$1.11 and looks set to test the upper end of recent ranges and US$1.12.Expected Ranges
- NZD/USD: 0.6080 - 0.6220 ▲
- NZD/EUR: 0.5500 - 0.5600 ▲
- GBP/NZD: 2.1000 - 2.1300 ▼
- NZD/AUD: 0.9050 - 0.9150 ▲
- NZD/CAD: 0.8320 - 0.8420 ▲