FxWirePro Medium Term Outlook: Buy NZD/USD targeting 0.8 area

The New Zealand dollar has been under pressure from two fronts. One, the Reserve Bank of New Zealand (RBNZ) has reduced rates by 25 basis points this month and the dollar has been going strong lately after Donald Trump secured a victory in the election of 2016. Mr. Trump’s policies are pro-dollar. However, the monetary policy statement from RBNZ shows that the central bank has likely to have moved to a wait and watch mode and hence there could be a considerable gap in time before it chooses to strike again. On the other hand, the dollar is more likely to benefit most from Trump policies in the medium to long term. Hence the knee-jerk reaction in the short term could see some retracing. While these two bearish factors are pounding the kiwi in the near term, a key bullish factor is at play here too, and that is the commodity prices.

Since August, there have been eight global dairy auctions and in 11 of them, dairy prices have risen twice in double digit. We expect this bullish factor to play a key role in the rise of kiwi exchange rate in the coming days.

Trade idea:

Buy Kiwi against the dollar at the current price of 0.709 and at dips towards 0.68 area, with targets around 0.8 area, with a stop loss at 0.66-0.65 area.