Never miss a story from David Cottle

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Cottle

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Currency Pair: Bullish NZD/USD

Expertise: Fundamental and Technical

Average Time Frame: One Month

New DailyFX Quarterly Forecasts for Q3 and are available here

After a strong run higher into last week the New Zealand Dollar has wilted somewhat on its daily chart but there is scope for hope that the year’s long downtrend will not be resumed.

Most of the recent price action would appear to have a lot to do with the ‘USD’ side of NZD/USD and rather less to do with the local currency. Suspicions that US interest rates may yet go lower knocked the US Dollar and raised risk appetite to the Kiwi’s benefit.

However, in the last couple of days softer trade rhetoric from Washington toward Beijing has seen the US Dollar creep higher. Of course, trade headlines are a real unpredictable lottery for currency investors and others but, if the world is really headed towards more monetary accommodation the New Zealand Dollar should find itself well underpinned.

Such backdrops always result in a ‘hunt for yield’ and the currency still offers it. Its key Official Cash Rate may be at a record low of 1.50%- and expected to go lower- but that will still probably leave the New Zealand Dollar offering better yields than most developed market peers and a triple-A credit rating to boot.

Technically speaking NZD/USD is headed back towards the downtrend line which capped trade from late March until the start of June. It may even get there and slide back into a support zone defined on the top by the 6357 region, which capped trade between mid-May and early June, and at base by this year’s low.

NZD Slips Could Be Worth Buying Against Macro Risk Backdrop

However, for as long as markets suspect that the Fed will be more accommodative in the weeks and months ahead, the New Zealand Dollar is likely to retain a stronger underpinning than it has had for much of this year. The recent peak of 0.6680 should be reachable again at the very least, with consolidation around that region and a push higher very possible if stronger risk appetite remains clear.

The Australian Dollar will also benefit in much the same way, probably, but, with more near-term rate hikes priced into its forward curve than New Zealand’s, the Kiwi might get more support.

Resources for Traders

Join a free Q&A Webinar and have your trading questions answered

Find out how AUD is viewed by the trading community in real time at the DailyFX Sentiment Page

Strategy not working? Here’s the number one mistake traders make

Just getting started? Check out the DailyFX Beginners’ Guide.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!