NZD/USD: headed higher before lower, target 0.7300

NZD/USD is currently consolidating the volatility post the RBNZ this week and remains on the 0.72 handle with a bullish bias.

The dollar index made some headway today, but the marginal gains meant the kiwi kept hold of the upside channel support resistance on the 0.72 handle ahead of Q2 retail sales that are expected to show solid growth in retail spending, with volumes up 1.5%. Inflation has remained low allow according to analysts at Westpac. In respect to the RBNA, there are more cuts ahead expected from the Central Bank. 

"As expected given the level of the currency, the statement contains a lengthy comment on the exchange rate," noted analysts at Nomura. "The RBNZ notes that “weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the New Zealand dollar exchange rate”. A consequence of the strong NZD is that it is leading to some deflation in tradable inflation and “this makes it difficult for the Bank to meet its inflation objective”. The RBNZ also adds that “a decline in the exchange rate is needed”."

NZD/USD levels

Analysts at Westpac offered their outlooks: "NZD/USD 1 day: Momentum remains positive, despite the pullback overnight, and it should find support around 0.7200. NZD/USD 1-3 month:  The RBNZ’s easing cycle combined with the Fed tightening in December should push the NZD lower towards 0.69 during the months ahead, although recent BOE and BOJ easing have made the NZD even more attractive to global investment flows such that a test of 0.73 is possible first."