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    Forecast for the NZD/USD has come true

    On June 2, I made a post in this blog, expecting the NZD/USD pair to break support at $ 0.71 and decline towards $ 0.6560 by the end of the year in the case the Reserve Bank of New Zealand (RBNZ) cut its rates on 11 June.

    On June 11, the RBNZ Governing Council did decide to lower its key rate by 25 basis points – from 3.5% to 3.25%. And last week, my prediction came true prematurely: the NZD/USD pair reached my designated target at $0.6560, and went even further, refreshing lows around $ 0.65 (see. Chart 1).

    111

    Significant fundamental factors contributed the New Zealand dollar’s sharp decline last week.

    • Falling prices for dairy products that make up a third of New Zealand’s exports. At the end of GlobalDairyTrade auction on July 15 the price index for dairy products fell by 10.7%, to 566 pips – the lowest since 2002 (see. Chart 2).

    222

    • Expectations of further policy easing by the Reserve Bank of New Zealand. The country’s macroeconomic statistics has been disappointing lately. The GDP report for the first quarter, released in June, showed a sharp slowdown of economic growth – from 0.8% to 0.2% q/q, while analysts expected 0.6% q/q (see Chart 3). This news triggered expectations of more stimulus from the RNBZ, thus another key rate cut – to 3% or even 2.75%. The next RNBZ meeting will be held this week.
    • 333

    While market’s interest towards the NZD is falling, investors turned their attention to other currencies, such as the US and Australian dollars. The USD was bolstered by the Fed Chair Janet Yellen’s comments during her testimony to Congress (15-16 July), when she said the Fed was still planning on more rate hikes this year. Demand for the Aussie rose because of rapid AUD/NZD strengthening. As a result, kiwi failed to withstand “bearish” attacks and fled “south”…

    Will the NZD / USD decline continue? I have my doubts about it. The market has probably priced in the possibility of additional monetary policy easing by the RBNZ, and this can halt kiwi’s decline or even trigger consolidation… To continue betting on the pair NZD/USD decline, in my opinion, is only possible in case of a clear breakout of $ 0.6560.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    On June 2, I made a post in this blog, expecting the NZD/USD pair to break support at $ 0.71 and decline towards $ 0.6560 by the end of the year in the case the Reserve Bank of New Zealand (RBNZ) cut its rates on 11 June.

    On June 11, the RBNZ Governing Council did decide to lower its key rate by 25 basis points – from 3.5% to 3.25%. And last week, my prediction came true prematurely: the NZD/USD pair reached my designated target at $0.6560, and went even further, refreshing lows around $ 0.65 (see. Chart 1).

    111

    Significant fundamental factors contributed the New Zealand dollar’s sharp decline last week.

    • Falling prices for dairy products that make up a third of New Zealand’s exports. At the end of GlobalDairyTrade auction on July 15 the price index for dairy products fell by 10.7%, to 566 pips – the lowest since 2002 (see. Chart 2).

    222

    • Expectations of further policy easing by the Reserve Bank of New Zealand. The country’s macroeconomic statistics has been disappointing lately. The GDP report for the first quarter, released in June, showed a sharp slowdown of economic growth – from 0.8% to 0.2% q/q, while analysts expected 0.6% q/q (see Chart 3). This news triggered expectations of more stimulus from the RNBZ, thus another key rate cut – to 3% or even 2.75%. The next RNBZ meeting will be held this week.
    • 333

    While market’s interest towards the NZD is falling, investors turned their attention to other currencies, such as the US and Australian dollars. The USD was bolstered by the Fed Chair Janet Yellen’s comments during her testimony to Congress (15-16 July), when she said the Fed was still planning on more rate hikes this year. Demand for the Aussie rose because of rapid AUD/NZD strengthening. As a result, kiwi failed to withstand “bearish” attacks and fled “south”…

    Will the NZD / USD decline continue? I have my doubts about it. The market has probably priced in the possibility of additional monetary policy easing by the RBNZ, and this can halt kiwi’s decline or even trigger consolidation… To continue betting on the pair NZD/USD decline, in my opinion, is only possible in case of a clear breakout of $ 0.6560.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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