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Domestic factors remain supportive, particularly NZ commodity prices, but the global sentiment and a weak USD are being questioned and cap the NZD/USD pair for now, economists at Westpac inform.

See –  NZD/USD  to strengthen to 0.75 as economic recovery continues – CIBC

Key quotes

“The year-old NZD/USD rally peaked at 0.7465 last week. It’s unclear whether that level will represent a minor or major top. Should the recent pullback extend below 0.7200, we’d opt for the latter interpretation.”

“Domestic fundamentals remain NZD-supportive, particularly commodity prices. This week we saw a surprisingly large jump in GDT dairy auction prices, with WMP gaining 21% and the overall dairy index gaining 15%. The NZD didn’t react, though, perhaps because markets ceased closely following GDT results after fairly stable prices over the past five years.”  

“Global factors have been less supportive recently, equities looking toppish as rising yields question valuations, and the US dollar looking resilient as US growth prospects improve.”  

“Global factors will dominate NZD/USD direction. Our medium-term outlook for upbeat global sentiment and a weaker USD could be tested during the weeks ahead.”