ANZ STRATEGY COMMENT: NZD: FXWW

From the FXWW Chatroom: After ending last week on the defensive, the NZD looks to have entered consolidation mode and I fear that we are once again going to drift sideways for a while as the focus for markets remains a long way away from these shores. I do believe the near-term bias for NZD/USD is still lower and certainly the jittery tone in markets on the likes of trade wars and German political infighting will cap any decent bounces. That is on top of policy divergences, a somewhat patchy domestic economic picture and an export commodity price story that is looking more mature. But it looks to be a headline driven market at the moment, which could mean the price action is dominated by snaps lower, followed by grinds, and that makes it tricky to get timing right. On the AUD/NZD cross, I’m still happy to sit here and argue that the economic fundamental picture suggests stronger levels. Only yesterday there was news out about local economists downgrading their views on the outlook for NZ GDP growth, which is certainly consistent with the signal from many of our own proprietary indicators. Yes, the Australian housing market is not looking flash, but New Zealand’s (well at least Auckland’s) is not setting the world on fire either. However, market positioning and risk-off sentiment (particularly on global trade fears) is clearly in the driver’s seat for cross right now, and it does look as though it has further to go.

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