FxWirePro medium term outlook: Kiwi to decline 700 pips against Dollar

We, at FxWirePro, are not big time Dollar bulls as we said many a times that current interest path not enough to provide support to Dollar, but the word is broad based. Dollar is in good position to extend gains over currencies like New Zealand Dollar, which suffering from lower commodities’ prices, namely milk.

Milk is New Zealand’s biggest export commodity accounting for more than 40% of all commodities exported. While some commodities like oil, iron ore, Soybean, pork belly and Steel rose after early year turmoil, price of milk has remained somewhat stagnant. Under such case, recent rise in New Zealand Dollar, which is still up 450 pips from January low and 600 pips from November is creating additional toll for the dairy exporters.

In recent days, Reserve Bank of New Zealand (RBNZ) has cut interest rates in response to weaker economy, lower inflation and higher Kiwi and we expect the bank to cut again.

There is a strong possibility that RBNZ will go for another rate cut at its meeting on 9th June or 11th August. We strongly expect bank to cut rates to 2% by year end.

Trade idea –

• With such outlook, we recommend, sell NZD/USD at current rate 0.68 and at rallies with target around 0.61 and stop loss around 0.705