Weekly Forex & Interest Rate Outlook

We adopt a cautious positive bias this week. Although the uptrend remains intact, momentum has stalled, suggesting further gains will be difficult. Recent strength has been a USD story rather than a NZD one (see Chart 2 – disappointing US data has pushed US interest rates, an in turn, the US dollar lower). That said, there are a couple of NZ events to navigate through this month: the CPI release this week could provide a small positive surprise, but the RBNZ on 24 July is likely to do the opposite. Thus there is a chance 0.8843 high could be tested this week, followed by a decline in two weeks time.