NZD/USD Outlook: Negative Near Term
The long-awaited unwind of extremely long speculative NZD/USD positioning appears to be underway. The NZD’s breakdown on 14 June has been sustained and heralds a further decline to 0.7800 during the weeks ahead. The USD should remain bid following Bernanke’s signal QE tapering is possible this year and that will frighten speculative long NZD/ USD positions (note that an unwind appears to have already started – Chart 3). Moreover, the NZ data pulse should slow temporarily as drought effects materialise (Chart 2). Longer term, though, continuing US/Euro/Japanese QE, the improving NZ economy, higher NZ commodity prices and the expectation of eventually higher RBNZ interest rates should push NZD/USD back above 0.8600 by late-2013.
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Westpac