Sell NZD/USD at 0.6705 – Westpac

Analysts at Westpac are recommending to sell NZD/USD pair at 0.6705 levels for the target price of 0.6500, while maintaining trailing a stop loss of 0.6800.

Key Quotes

“Rationale:

• We expect RBNZ to cut OCR by 25bp to 1.25% on 7 August, and signal potential for more. We expect a follow-up cut in November to 1.0%, with a risk this is delivered in September, and the OCR ultimately falls below 1.0%. Domestic activity is weaker than the RBNZ had forecast.
• Markets are pricing 20bp of easing in August, and 42bp by November, implying markets should fall further if our forecasts prove correct.
• NZ-US yield spreads have explained much of the NZD’s recent gains, but they should soon become a headwind: markets have priced in plenty for the Fed (100bp) but arguably not enough for the RBNZ.
• Technically, NZD/USD’s 3c rise since May looks corrective, and may be giving way to a revisit of May’s 0.6500 low.”