The recent rally is likely to extend this week. We target the 0.7610-0.7620 area (those were the main lows last Dec – Chart 1) but a run as far as 0.7700 would not surprise. NZ’s economic data pulse is currently running hot (Chart 2), with dairy prices rising, migration at record levels, and the domestic economy in solid shape. Combined with USD’s stall since late Jan, plus speculative positioning being short NZD (Chart 3), an argument for multiweek NZD/USD strength can be made.
The key NZ event this week will be the semi-monthly dairy auction (Tue), expected show another price rise due to the ongoing drought.
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