NZD/USD Outlook: Down this week
NZD/USD is expected to test the bottom of a two-month range. The NZD continues to consolidate its large May/June decline, stuck inside a 0.7685-0.8135 range. Near term, however, the
currency looks weak and should test the bottom of this range during the week ahead. The main reason for this is likely to be continuing market expectations the Fed will start tapering QE in September. There’s also the RBNZ’s newly announced macroprudential restrictions which could temporarily curb the housing market and credit growth during the next few months. Our multi-month bearish forecast is dependent on Fed tapering starting in 2013. Such action could be announced at any of the FOMC meetings in September, October or December. If tapering is announced in September and is significant in magnitude, NZD/USD will probably break below 0.7685 towards the low 0.70’s. Alternatively, if the Fed disappoints the taperists, then the NZD/USD will rebound to the 0.8400-0.8500 area.
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