Kiwi Ready for Breakout

Helen Rush
Helen Rush
Senior Analyst – Capital Markets •

NZDUSD came under selling pressure this morning, as Pre-Election Economic and Fiscal Update (PREFU) came out less optimistic than expected.

NZDUSD came under selling pressure this morning, as Pre-Election Economic and Fiscal Update (PREFU) came out less optimistic than expected.

On the whole the economy state of New Zeland is quite robust, however, there were hints on slower growth in future. NZ finmin revised lower GDP growth outlook from 3.7% to 3.5%. And it may be related with a strong national currency which appreciated from May till July by more than 10%.

Moreover, according to Global Dairy Auction, the dairy prices have not shown any increase during the last 5 weeks. And we must say that dairy industry plays a big role in New Zealand economy. The country exports about 95% of its dairy production. In 2016, dairy was New Zealand's largest export sector (18% of total goods and service exports), meaning the lower dairy prices may have negative impact on country’s budget.

In this environment the Reserve Bank of New Zealand will most probably keep talking down NZD hinting on neutral or easier monetary stance.

The pair is trading around 0.72 area and is ready to break the key support level in the nearest future. If broken, the next target is at 0.7140.

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