Westpac Potential For Further Weakness In NZD/USD In The Month Ahead

Westpac note “potential for further weakness in NZD/USD during the month ahead, with $0.6200 likely to be tested. If that broke, we’d then target the $0.6000 area, which was an area of much congestion in early 2020. The main drivers of NZD/USD at present are global risk sentiment (proxied by equity prices, for example) and the U.S. dollar (in turn driven by both risk sentiment and yield spreads). During the month ahead, the direction of risk sentiment will be key. But much further ahead, by year end, assuming sentiment stabilises, there is potential for the NZD to rebound towards $0.68. By then, the Fed story should be fully priced, which means yield spreads will no longer weigh on NZD/USD, while the spotlight will increasingly be on higher NZ commodity prices.”