NZD/USD outlook

NZD/USD has performed well since the resurgence of the US dollar on 22 October, outperforming all the majors over the period since. And despite dairy prices set to post a second modest decline this week, the NZD should retain support from the RBNZ's less dovish stance indicated  on 29 Oct. 

"A bullish bias is likely this week, targeting the 0.6800-0.6900 area. The NZ event calendar highlight this week is the set of Q3 labour reports on Wednesday, which will give us updated readings on unemployment, employment growth and wage inflation", says Westpac. 

The employment growth is likely to increase slightly to 0.4% (qoq) but strong inward migration should elevate the unemployment rate from 5.9% to 6.2%. Wage growth may pick up slightly but remain low.

"The NZ economy is slowing, the RBNZ easing is likely in December, and the Fed possibly tightening the same month. NZD/USD is forecasted at 0.63. The main risk to this bearish view is the Fed delays its tightening cycle beyond December. A secondary risk is the RBNZ doesn't cut in December. 1 year ahead forecast is 0.62, based partly on the OCR being cut to 2.0%", added Westpac.