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New Zealand dollar crashes below 0.66 and eyes a shift back toward 0.64

NZD - New Zealand Dollar

The New Zealand Dollar was one of the worst performers through trade on Wednesday, crashing below 0.66 to touch intraday lows at 0.6540. Weaker risk sentiment drove direction as markets largely ignored the RBNZ policy update. The central bank maintained its current forward guidance and made few changes to its QE program. While the bank affirmed its commitment to additional policy tools to try and drive economic growth it offered little to suggest the timing of a shift to negative interest rates will be brought forward, preferring to adopt increased lending programs in a bit to reduce bank funding costs and stimulate lending through the back half of 2020.

The domestic economic outlook remains soft and don’t anticipate any significant change through Q4 given the uncertainty surrounding souring global forecasts. The NZD remains vulnerable to ongoing corrections in risk demand and while there is some mid-level support at 0.6520 a break below this handle could prompt a correction back toward 0.64.

Attentions today remain with recent themes as sentiment continues to dominate direction

Key Movers

The USD rally continued Wednesday, marking a fourth consecutive daily appreciation and an 8-week high. The sell off across equities resumed, sparking a push to haven assets as investors question previous expectations for economic recovery as growing COVID-19 infection rates across the US and Europe look to scuttle hopes for a swift rebound.

The Euro fell below1.17 touching 1.1652 after domestic PMI’s showed growth across key business sectors ground to a halt in September amid fears new restrictions will scuttle any further economic recovery. Having tested1.20 just last month the combined currency appears vulnerable to deeper corrections as investors re-valuate expectations for growth and positive sentiment sours.

With little of note on the docket today we expect direction will remain with the current theme. Sustained negative headlines will likely see add prompt further USD upside and a correction in July’s gains for other major units.

Expected Ranges

NZD/USD: 0.6480 - 0.6620 ▼

NZD/EUR: 0.5580 - 0.5690 ▼

GBP/NZD: 1.9020 - 1.9580 ▲

NZD/AUD: 0.9230 - 0.9305 ▼

NZD/CAD: 0.8720 - 0.8830 ▼