NZD/USD: Downside risks - Westpac

Imre Speizer, Research Analyst at Westpac suggests that NZD/USD has downside risks and given the recent rebound in the US dollar and NZ election uncertainty, it should target 0.7130.

Key Quotes

“Last week’s fall in NZD/USD was mainly due to the stronger USD, lower NZ-US yield spread, and (possibly) uncertainty about the makeup of the next NZ government.”

“This week’s NZ event calendar will be minor for markets, with only QV house prices on Wed, and a GDT dairy auction on Tue (futures currently pricing a small rise). The government should be formed by 12 Oct.”

“Three months ahead: Our medium term outlook for NZD/USD is largely dependent on the outlook for the US dollar. A persistent rebound in the US dollar by year end is needed to pull NZD/ USD back to the 0.70 area.”