If 6 weeks of consecutive falls including a 3% last week weren’t enough, a 7th week of losses for NZD/USD is coming to light, and with a bang.
Early in the Asian session, when liquidity is low and the dollar trend remained intact, the authorities in New Zealand provided a one-two punch that sent kiwi/dollar to lows last seen in late August 2013.
NZD/USD fell from around 0.7850 to 0.7706 before bouncing back to stabilize around 0.7760, in a show of great volatility. As we wrote last week, the AUD and NZD currencies were on path for more devaluation.
The newly re-elected Prime Minister John Key said that a “Goldilocks” exchange rate for NZD/USD would be around 65 cents. This is around 18% of a devaluation for the NZD$ at the time his comments came out, and these are levels last seen early in the global financial crisis.
The second blow came from the RBNZ, and not for the first time. The central bank released its transactions data, and it revealed that Governor Wheeler and his colleagues intervened in August by selling $NZD 521 million, thus weakening the New Zealand dollar. While 521 million New Zealand dollars are not too much in the global markets, the fact that the Bank opted for intervention and probably did it quite wisely certainly joined in for a strong blow.
On the way down, NZD/USD slipped below support at 0.7715, but recovered. The round number of 0.78 is weak resistance. For more, see the NZD/USD forecast.
Here is how it looks on the weekly chart:
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