NZD/USD: rally remains intact - Westpac

According to Imre Speizer, Market Strategist at Westpac NZD/USD could break the formidable barrier at 0.7325, that would signal a move toward 0.7500.

Key Quotes:

“The month-old NZD/USD rally remains intact, although 0.7325 is proving a formidable barrier. We see a greater chance of that level breaking than a multi-cent fall during the weeks ahead. A break above 0.7325 would signal a move to the 0.7500 area, where there was much congestion during Q2 2015.”

“The dominant factor behind NZD strength this year has been the demand for highyielding instruments such as equities and high-carry currency NZD. Indeed, while our fair value model shows the NZD to be fair at around 0.73, its relationship with interest rate differentials has weakened but with risk sentiment (which can be proxied by equity indices) has strengthened. As long as sentiment remains elevated, NZD/USD should remain strong.”

“The 30% rebound in milk powder prices in August is a fresh supportive factor, although there are questions about its sustainability.”