Kiwi is Sold, and It’s Not About Cards Spending

Helen Rush
Helen Rush
Senior Analyst – Capital Markets •

Take a look at NZD/USD. More than a year it trades within a broad 0.6850-0.7340 range.

Take a look at NZD/USD. More than a year it trades within a broad 0.6850-0.7340 range. Since early May till early July it managed to walk up almost 5 figures, and now it’s time for reversal, or at least for correction. Every time the pair approaches the upper range line, it falls under selloff. And today the depreciation gathered the pace. 

 

Surprisingly, the driver of a 50-pip move down was a second-tier report. Usually, retail spending on electronic cards doesn’t provoke any reaction of such scale. The thing is that the numbers significantly missed expectations (0.0% vs +0.8% expected), and all that happened despite a boost from the British and Irish Lions' rugby tour in New Zealand.

What does it mean? Most probably the appreciating NZD slows down the consumer spending, and this lowers the chances of higher inflation, and this lowers the chances of RBNZ rate hike in the nearest future. And this is the argument in favor of kiwi depreciation.

The nearing testimony of Janet Yellen in Congress may exacerbate the move down if the tone of the FED’s chairwoman is more hawkish than expected.

Any correction higher offers an attractive opportunity to enter the market with short position on NZD/USD with the nearest target at 0.7200 followed by 0.7160.

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