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Kiwi under pressure as Europe increases lockdown measures

NZD - New Zealand Dollar

The New Zealand dollar relinquished more of the week’s early gains throughout trade on Thursday, giving up 0.6650 to test support at 0.66 US cents. Despite a rebound across equity markets, the NZD failed to make any upward headway amid broader USD strength and a clouded global economic outlook. Worsening COVID-19 conditions across Europe and the US have only heightened fears for an extended 2nd shutdown, while the ECB flagged further monetary policy easing, propping up the world’s base currency as investors looked to divest of the common unit. As markets sideline bets leading into next weeks US election, we expect the NZD will remain largely rebound through Friday, bouncing between current support and resistance handles. We still see broader ranges between 0.64 and 0.68 maintained into the end of the year, however a shock Trump victory and worsening COVID-19 conditions could prompt a more proactive risk-off shift and force investors to test lower bounds in a push to haven assets. Attentions today remain affixed to election and pandemic headlines.

Key Movers

The US dollar advanced through trade on Thursday, buoyed by a sharp downward correction in the euro amid fears the 2nd shutdown will curtail the economic recovery, as the ECB chases further policy easing in an attempt to stave off a worsening recession. The US dollar index, driven by euro weakness touched a four-week high, up half a percent to 93.94. The common currency fell through 1.1750 and 1.17 to touch intraday lows at 1.1650, as investors looked to divest of the single unit ahead of further ECB rate cuts. Comments from policy makers and price action across rates markets suggest further easing and additional rate cuts are imminent, reducing the attractiveness of the euro. As the continent grapples with a ruthless 2nd wave of coronavirus infections, hopes Europe would recover at a faster pace than the US have all but faded. With investors' attentions turning to next weeks election we could see some definitive price action through the back half of next week as investors jump back in having navigated the critical risk event.

Expected Ranges

NZD/USD: 0.6560 - 0.6680 ▼

NZD/EUR: 0.5620 - 0.5710 ▲

GBP/NZD: 1.9320 - 1.9620 ▼

NZD/AUD: 0.9390 - 0.9450 ▲

NZD/CAD: 0.8790 - 0.8860 ▼