New Zealand Dollar Talking Points
NZD/USD[1] is under pressure after trading to a fresh monthly high (0.6724) earlier this week, and the exchange rate may face a larger pullback going into November as the US Dollar[2] appreciates on the back of waning investor confidence.
NZD/USD Pullback Takes Shape Amid Failure to Test September High
NZD[3]/USD[4] appears to have reversed course ahead of the September high (0.6798) as the wave of lockdowns across Europe[5] drags on risk appetite, and the exchange rate may test the October low (0.6547) ahead of the Reserve Bank of New Zealand’s last meeting for 2020 if the recent shift in investor confidence leads to a flight to safety.
Looking ahead, the RBNZ may provide a more detailed forward guidance at its next interest rate decision on November 11 as Governor Adrian Orr[6] insists that there’s “plenty of room” for the board to adjust the Large Scale Asset Purchase (LSAP) Programme, which currently sits at NZ$100 billion, and the New Zealand Dollar may face headwinds over the coming months as the central bank prepares to deploy a slew of new non-standard measures in an effort to stimulate a stronger recovery.
In turn, the decline from the yearly high (0.6798) may turn out to be a change in market behavior rather than an exhaustion in the bullish trend, but the New Zealand Dollar’s 24% surge from the lows of March[7]could be the start of a prolonged period of strength against its US Dollar counterpart as the break above long-term trend resistance hints a cyclical upturn is afoot.
Meanwhile, the crowding behavior from earlier this year has resurfaced as the IG Client Sentiment report[8] shows 29.88%
