Looking for sell levels
The NZD kicked the global trend last week, rising 0.2% against the USD and returning to above US$0.7 and A$0.8 in the process. As a comparison, the EUR/USD was down 2.1% and the AUD/USD down 2.5%.
The first point to note is news is still accumulating about the weak NZ economy and the anticipation of rate cuts will probably build as we move into the 11-Sep RBNZ Statement. Expect some NZD weakness early September.
What happens in between time, and in particular how high the NZD reaches, will most likely depend on international trends.
Three points suggest some caution above simply extrapolating the recent USD strength: August is a month of thin volumes as northerners holiday; the market is still increasing its pricing of risk for US banks, not a trend that encourages confidence about the US economy and hence the USD; and the rapid narrowing of the gap between European and US interest rates has stalled (and maybe ended for now).
The chance of a weaker USD suggests placing sell orders for the NZD around a couple of cents higher, say above US$0.72 and A$0.83.
