Fundamental reasons include:
China has just removed the floor on lending rates to try and boost its economy, which is having a big impact on Au/ Asia currencies.
Strong credit card spending in NZ for June, which rose 2.6% on the month, and is rising at a 5.4% annual rate, the highest pace since Dec 2011.
Since the RBNZ is concerned about rising consumer debt levels, this data may worry the RBNZ on the same week that it holds its latest policy meeting.
Although the RBNZ is expected to remain on hold when it meets on Wednesday, a hike in interest rates, or hawkish comments from the Bank, cannot be ruled out as debt levels continue to rise.
Interest rate forecasts for New Zealand continues to move higher, with 2 rate hikes fully priced in before the end of the year. This is also boosting NZD.
Technical outlook:
NZD is testing a key level of resistance at 0.7950 - the 50-day moving average.
Above here opens the way to 0.8030 - the base of the daily cloud and a significant resistance level, which marks the end of a technical downtrend.
0.8120 is another resistance level of note, the high from June 14th.
Takeaway: The NZD Is riding on the coat tails of expectations of a hawkish RBNZ and the China lending move, which is having a short term upward impact on NZD. The risk in the next few days is that the RBNZ disappoints expectations; however, if it does point to future rate hikes then we could see a protracted NZD rally, although we would expect 0.8020 to attract some light profit taking in NZDUSD in the short term. Any pullback may act as a good entry opportunity.
IMOH, Clement I.
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