- NZD is one of the best performing G10 currencies on Wednesday, with NZD/USD crossing above 0.7000 again amid a softening USD.
- Month-end flows are likely to be one factor helping NZD, as are recent suggestions for the RBNZ to include house price inflation in its inflation remit.
NZD/USD has again rallied north of the 0.7000 level and hit fresh highs since June 2018, marking an impressive reversal from earlier lows around 0.6960. The pair currently trades slightly less than 40 pips higher on the day or just up by just over 0.5%.
Month-end flows, reduced RBNZ negative rates bets likely helping
Month-end flows are arguably getting kicking a little earlier than usual this month, given that Thursday’s US Thanksgiving holiday largely renders the rest of the week a right off as far as US session market volume is concerned, as well as potentially signalling lower volumes ahead on Monday 30 November.
Therefore, price action into Wednesday’s 16:00GMT London fix was choppy and largely seemed to work in favour of the likes of NZD, CAD and GBP.
However, it is also likely that markets are continuing to digest Tuesday’s news about the New Zealand government throwing around the idea of having the RBNZ include house price inflation into its overall inflation targeting remit, amid concerns of an overheating property market. This, of course, would have a hawkish read across to RBNZ policy given that house price inflation has been significantly higher than consumer price inflation over recent years in New Zealand and, as such, markets might still be reducing negative rate bets (supporting NZD).
NZD/USD bulls pushing for a move back to June 2018 highs
With NZD/USD looking to have now tackled the psychological 0.7000 level, bulls are likely to increasingly push for a move higher to June 2018 highs at just under 0.7070. Conversely, if the pair loses recent upside momentum, significant areas of support reside close by to the downside; the December 2018 high sits at 0.6975, as well as the Q1 2019 highs at just below 0.6950 – buyers have already demonstrated that they were eager to jump in ahead of these levels no Wednesday when the dip to lows around 0.6960 was convincingly bought.
NZD/USD weekly chart
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