NZD/USD to extend its downward correction on a break below 0.6945 – Westpac

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Momentum in the NZ economy has slowed. NZ housing curbs may bite and the US dollar is supported by fundamentals. A break below the 0.6945 level would imply the NZD/USD has further room to the downside, economists at Westpac inform.

The NZ event calendar next week is headlined by the RBNZ Monetary Policy Review

“NZD/USD’s downward correction from the 0.7465 high on 25 Feb may not yet be complete. A break below 0.6945 would confirm such, while a break above 0.7070 would flip us into a near-term bullish stance.” 

“Stepping back from the near-term volatility, we remain bullish NZD/USD, expecting 0.7600 by year-end. The main factors are likely to be a weaker US dollar (due to improving global growth relative to the US) and upbeat global risk sentiment.” 

“Next week’s RBNZ decision is unlikely to ruffle the NZD much if it repeats its familiar policy messages. That said, we’re always mindful of risks in both directions. A dovish scenario would comprise commentary on the negative impact from the government’s recent housing curbs, as well as the slowdown in economic momentum over the past few months. A hawkish scenario (less likely) would note risks that the looming inflation spike could be sustained.”