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NZD pushes back on move toward 0.67 as risk appetite improves

Wednesday 22 December, 2021

Daily Currency Update

The New Zealand dollar rallied through trade on Tuesday bouncing off 0.67 through the latter stages of the domestic session and rising steadily overnight. A shift in sentiment helped fuel demand for the NZD, prompting a break above key resistance handles at 0.6760/62 and an extension toward intraday highs at 0.6770. With little of note on the macroeconomic ticket market focus shifted away from near-term Omicron headwinds as analysts instead bet the latest COVID-19 mutation will not severely impact the global economic recovery. While we are still awaiting firm scientific evidence this new variant is less virulent, anecdotal reports continue to support this thesis, helping ease concern and stave off a significant risk off shift. We expect the NZD will continue to trade between supports at 0.67 and resistance on moves above 0.68 and approaching 0.6850 through the coming days as liquidity dries up and markets look to Christmas and the New Year. Risks to this outlook remain the evolving Omicron impact. A worst-case scenario and complete risk sell-off will see the NZD test new lows. Having tested 0.67 across the last two days, a break below this level could signal an extended downturn toward 0.66.

Key Movers

Risk sentiment shifted on Tuesday as investors set aside fears the Omicron variant will derail the global economic recovery, prompting a sell-off across haven assets. The Japanese yen and Swiss franc were among the day’s worst performers, with the yen giving up 114 amid a broader USD/JPY correction and potential shift back toward 115. With investors chasing risk assets the USD came under pressure giving up ground to commodity led counterparts and the GBP. Sterling surged back through 1.32, testing 1.3270 while the euro drifted sideways, unable to maintain Monday’s momentum, slipping back below 1.13. With little of note on the macroeconomic ticket this week, direction will stem from ongoing fluctuations in the risk narrative. We broadly expect the USD will maintain its recent momentum leading into Q1 next year as markets adjust expectations for Fed monetary policy normalisation.

Expected Ranges

  • NZD/USD: 0.6700 - 0.6830 ▲
  • NZD/EUR: 0.5940 - 0.6030 ▲
  • GBP/NZD: 1.9510 - 1.9690 ▼
  • NZD/AUD: 0.9430 - 0.9520 ▲
  • NZD/CAD: 0.8680 - 0.8790 ▲