NZD/USD: testing below 0.69 handle, enroute for 0.6817?

• NZD soft on potential reforms at the RBNZ
• US dollar to continue its recovery?

NZD/USD is tender with the new Labour-led coalition government signalling reform when it comes to economic policy, including the targets of the country’s central bank.

"With the USD on a run higher and NZD under political clouds late in its economic cycle, the NZD/USD is biased lower yet. Dairy prices are easing too, which combined with stable oil prices will take the shine off New Zealand’s Q4 terms of trade," explained analysts at ANZ today who, however, also said that not all is lost though, with the lower NZD easing financial conditions, especially for exporters with the rosy global backdrop.

Meanwhile, for the day ahead, the potential for further downside to 0.6850 could come of the recent recovery in the greenback persisting and/or the market continues to view NZ political developments negatively, according to analysts at Westpac.

NZD/USD 1-3 month:  

On a wider look, the analysts at Westpac argue that if the RBNZ remains firmly on hold, as they expect, and the US dollar rises on the delivery of a Fed interest rate rise in December, then NZD/USD should fall below 0.68 by year-end.

NZD/USD levels

The bears took out 0.6908, the 11th April low and now target a close below 0.6880 eyeing 0.6817 10th May 2017 lows. Daily RSI is on oversold territory below 30 at 27 while the FXStreet Technical Confluences Indicator shows that 0.6870 could be a tough area of support as the daily pivot point at S3. On a correction/reversal, the bulls have a lot of legwork to do to get anywhere near out of the bearish territory and only at 0.7080 and 0.7120 levels could there be any conviction in a reversal.