NZD/USD Outlook: Negative Near Term
The suggestions the Fed is mapping out a QE-exit strategy has caused significant USD-buying, and much NZD/USD damage, such that a near term breakdown is likely. We earlier flagged near term negative risks for the NZD – a midyear US seasonal slowdown, possibly peaking NZ economic momentum, and record speculative long-NZD positions in the futures market. An early exit from the Fed was not one of these risks, and we still don’t think it is – the panic buying of the past few days should subside this week. However, it has pushed NZD/USD to a vulnerable level, (0.8260) where it’s now at risk of falling to the high 0.70’s during the weeks ahead as the negative factors cited above take over.
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