NZD/USD nearer 60c in the next few weeks.
The US dollar rebound finally came last week i.e. the USD dropped after having appreciated very strongly since mid July. Significantly the EUR/USD gained 5.1%, breaking above the range of the previous six weeks. The momentum was not enough for the NZD/USD to emerge from its recent range but such a break is likely.
The key factor will be the EUR/USD. The move last week was largely the result of a widening interest rate differential as even lower interest rates are anticipated in the US – including a 0.25% or 0.5% cut Wednesday morning – coming at a time that questions are being raised as to whether the ECB will be as aggressive, and against a backdrop of continued disturbing news from the US. It does appear that the USD tide has turned for now and an NZD/USD nearer 60c is likely in the next few weeks.
More generally currency markets are likely to trade within broad sideways patterns in the next 2-3 months. There will undoubtedly be more bad news from Europe to come, and hence EUR weakness at the time. The Japanese authorities will eventually resist a weaker USD/JPY. The choppiness produced by these three major currencies will set the tone for exchange rates such as the NZD/USD, NZD/EUR and NZD/JPY. Such an outlook suggests placing orders to sell NZD/USD above 57c and buying below 53c for medium-term requirements.
Post Details
Posted on December 15, 2008
at 9:36 pm
Written / posted by: Piere
Filed under: Currency Trading