NZD/USD: Well anchored around 0.67-0.70 - BNZ

According to the  NAB Research Team, the NZD/USD pair looks to be in a consolidation phase and they see it could rise on the back of a US-China trade deal. 

Key Quotes: 

“Part of NZD weakness last week reflected broad-based USD strength, with the greenback rising against all the other majors. Over the last couple of weeks US economic data have positively surprised, going against the global trend of weak data particularly in the euro area, UK and China.”

Our short-term fair value NZD estimate remains unchanged just below the 0.68 mark, with lower NZ rates offset by higher NZ commodity prices. Amidst the negative headlines out there, NZ commodity prices are showing a nice recovery, led by much stronger dairy prices. If prices stay steady here, then Fonterra’s milk payout is likely to be at the top end of its $6.00-$6.30 range, but with strong momentum in dairy prices, upside risks have emerged.”

We still see the NZD well anchored around 0.67-0.70. An uber-dovish RBNZ this week, soft Chinese data and/or strong US data could see the bottom end of that range breached, but we wouldn’t see it lasting long. We remain positive on some sort of US-China trade deal eventually prevailing, which we see as an upside risk factor to look forward to. And, on balance, we can’t see the RBNZ meeting the dovish market expectations this week.”

“The NZD looks to be in a consolidation phase. The next resistance level is 0.6970, but the mid-2018 high of 0.7060 might be a tougher level to crack. Initial support area is 0.67.”

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