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NZD touches lowest level since November 2020 before recovering

Wednesday 21 July, 2021

Daily Currency Update

NZD - New Zealand DollarA reversal in risk sentiment has halted the decline of the New Zealand dollar, for now. Although concerns about the current Delta variant appeared to recede overnight, pushing the S&P500 up nearly 2%, the New Zealand dollar, and other risk sensitive currencies failed to rise. They did however halt their recent falls with NZD/USD roundtripping from 0.6925 to 0.6881 and back, with the 0.6881 level representing the lowest level seen since November 2020. A similar story for the Australian dollar saw AUD/USD fall to the November 2020 low of 0.7300 before settling back around the 0.7330 handle. This saw AUD/NZD trade sideways around the 1.06 level. It is hard to find a clear catalyst for the sharp rise in sentiment overnight. One theory put forward by analysts is that equity markets were oversold yesterday as rising fears about the spread of the new Delta variant and heightened political tensions with China were digested by markets. Another one-week lockdown was also announced for South Australia which will be a further drag on Australian GDP forecasts and with New Zealand’s close ties with Australia, does not help NZD sentiment. The economic calendar for today is a light one. We have Australian retail sales for June which will not be of too much importance to markets given they will not capture the lockdowns in Sydney, QLD, NT and Victoria. Having tested downside supports at 0.6880, further weakness could see next levels tested at 0.6800.

Key Movers

One market mover that we are keeping an eye on for today is the Canadian dollar. The Canadian dollar was the best performer overnight, as crude oil futures rose 1%, pushing USD/CAD down 0.5% to around 1.27. Sticking with commodities, we also saw copper up 1.5%, with gold and iron ore falling 0.2% and 0.3% respectively. The USD index also touched four-month highs as it rose 0.1% on the day. This sees EUR/USD trading around 1.1785 heading into today and USD/JPY testing the key 110 level.

Expected Ranges

  • NZD/USD: 0.6880 - 0.6953 ▼
  • NZD/EUR: 0.5830 - 0.5920 ▼
  • GBP/NZD: 1.9620 - 1.9800 ▲
  • AUD/NZD: 1.0550 - 1.0650 ▲
  • NZD/CAD: 0.8700 - 0.8860 ▼