Daily Currency Update

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NZD fails again to break resistance

NZD - New Zealand Dollar

The New Zealand dollar crept higher through trade on Monday, edging back toward 0.73 US cents while tracking sideways against most key crosses. With little of note on hand to drive direction the NZD benefited from broad USD softness and a correction in month end buying. The New Zealand Dollar remains firmly entrenched within a narrow trading band having failed to break above resistance at 0.7315 last week. While we remain optimistic the NZD will outperform moving into the second half of the year an extension above resistance appears unlikely in the immediate short term. Ongoing pandemic led uncertainty continues to weigh on demand for risk as the push and pull of short- and long-term drivers ensures ranges remain narrow. While range bound against the USD last week RBNZ surprise has helped propel the NZD back above 0.94 against the AUD. With a divergence in monetary policy estimates emerging today’s RBA policy statement will be key to determining medium term direction.

Key Movers

With the US and UK both enjoying an extended weekend in observance of Memorial Day and the Spring Bank Holiday price action across majors was minimal through Monday. A correction in Month end USD rebalancing prompted some USD softness with the Euro, GPB and JPY all enjoying small gains. We retain our bias for a bearish USD as attentions turn to a host of data across both the manufacturing and services sectors. PMI data across China, Europe and the US should provide a greater insight into ongoing input costs and supply constraints, affording a possible glimpse into next weeks CPI inflation print. With inflation concerns easing through the last 7-10 days another outperformance will likely spark another risk off run for fears central banks will have no choice but to intervene in a bid to avoid overheating the economy.

Expected Ranges

NZD/USD: 0.7230 - 0.7315 ▲

NZD/EUR: 0.5890 - 0.5990 ▲

GBP/NZD: 1.9420 - 1.9620 ▼

NZD/AUD: 0.9280 - 0.9450 ▲

NZD/CAD: 0.8730 - 0.8850 ▲