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Kiwi vulnerable as risk demand pushes investors toward haven assets

NZD - New Zealand Dollar

The New Zealand dollar edged lower through trade on Friday relinquishing part of the recovery won in the aftermath of the RBNZ rate cut. Having touched 0.6493 the NZD edged lower into the weekly close, shrinking back toward 0.6450 as trade uncertainties and global growth concerns weighed on investors demand for risk, forcing a push toward haven assets.

Demand for safety continues to dominate broader directional flows, evidenced in the NZD’s performance against the Japanese yen. The Kiwi marked a third weekly depreciation against the haven asset, and we expect the commodity lead currency to remain vulnerable in the weeks ahead, falling back below 0.95 against the AUD, while pushing below 0.68 against the JPY. Despite the downturn on Friday there is some optimism for upside volatility against the USD as expectations the Fed will be forced to ease rates again increase. President Trump called for the FOMC to cut rates by a full percentage point.

We expect support at 0.64 with resistance on moves approaching 0.65 and 0.65.

Key Movers

Escalating trade tensions, stagnant global growth and European political concerns weighted on investors demand for risk through trade on Friday, prompting a rally in both the Japanese yen and Swiss franc. The yen touched 7-month highs against the USD as ongoing US-China trade tensions and a slow down in US domestic economic performance forced the worlds base currency lower against a basket of major counterparts. The dollar was hampered by softer than anticipated inflation indicators, while President Trump confirmed the US would not enable business with Chinese Telecom company Huawei, nor was it ready to compromise on a trade deal. The comments fuelled concerns the trade tiff will continue through the foreseeable future further weighing on global growth. The Yen opens the week just short of the 7-month highs touched on Friday at 105.52.

The Great British pound slid to a 2 and half year low against the dollar on Friday as second Quarter growth data showed the economy had shrunk for the first time since 2012. Falling through 1.21 and 1.2050 sterling touched 1.2028. While year on year growth remains above 1% Friday’s data print has alarmed investors already bracing for a no deal Brexit. As the risk premium continues to rise with ongoing Brexit uncertainty there is real scope to suggest the pound will make a push below 1.20 in the coming days.

Expected Ranges

NZD/USD: 0.6400 - 0.6530 ▼

NZD/EUR: 0.5700 - 0.5850 ▼

GBP/NZD: 1.8480 - 1.8880 ▼

NZD/AUD: 0.9480 - 0.9580 ▼

NZD/CAD: 0.8500 - 0.8650 ▼