NZD/USD: Solid domectic picture to underpin the kiwi – ANZ

The kiwi starts the day above 0.70, but it is a far cry from where it was yesterday when NZD/USD briefly sported a 0.71-handle. The NZD capitalised on earlier strength, only to drop sharply when oil collapsed off multi-year highs. But economists at ANZ Bank think the solid domestic story will support NZD.

RBA tapers weekly bond purchases

“Tuesday’s strength was understandable given the ramping up of OCR expectations (with a hike now ~90% priced in by November), and it got more legs after the RBA dialled stimulus back a touch. But the collapse/reversal in oil (from a multi-year high) overnight has whacked commodity currencies, dented risk appetite and hit equities.” 

“We think the NZD can survive this challenge (we’re not an oil exporter) given the decent domestic picture, as confirmed by yesterday’s NZIER QSBO survey (which aligns with our own ANZBO survey), but expect volatility.”

“Support 0.6900/0.6940 Resistance 0.7100/0.7230”