The New Zealand dollar outlook from Westpac Institutional Bank (Imre Speizer in NZ)
- We expect NZD/USD to fall to at least 0.62 by year end.
- The main drivers are likely to be a tighter Fed, an easier RBNZ, and weak commodity prices.
- The Fed's looming tightening cycle will probably be the main contributor to a softer NZD/USD via a stronger US dollar.
- However, also contributing to the bearish case will be the RBNZ's easing bias, which is expected to persist for some time, and NZ commodity prices, which are expected to remain weak over the medium term.
More:
- expect the Fed to start increasing its policy rate from December, which should support the US dollar for some time
- expect the RBNZ to cut the OCR further in December, and to maintain an easing bias thereafter. Our forecast is for a terminal rate of 2.0%.
- If NZ is hit by a hard drought expect a brief spike in NZD then a fall lower
Technicals:
Since peaking in July 2014 at 0.8836, NZD/USD has been locked in a persistent downtrend, punctuated by periods of consolidation (e.g. Dec 2014, Mar 2015, Oct 2015). It resumed its decline on 15 October and with momentum clearly pointing downwards targets the Sep low of 0.6237 during the month ahead. Corrective bounces are likely to be capped by 0.6500 - a level which provide solid support last week.
