NZDUSD: Kiwi learning to fly again

The Asia-Pacific region published healthy reports that keep financial markets’ wariness from turning into a sustained sell-off. The New Zealand dollar has surpassed the milestone of 0.7000, the Chinese yuan is testing the highs of the last six weeks, and the Japanese yen is trading near 109 per dollar, its lowest in 8 weeks.

The New Zealand dollar is up by 0.5% for the second day in a row, surpassing the major round level 0.7000 on strong labour market data. Employment rose 1% in the second quarter after 0.6% in the first. The unemployment rate fell to 4% from 4.6% in the second quarter, returning to pre-pandemic levels. Technically, the RBNZ has no obstacles to normalise monetary policy as inflation, GDP, and employment have already fully recovered. Additionally, wages jumped by 1.2% in the previous three months, the sharpest jump since 2008.

Although the New Zealand economy has suffered less than other developed countries, it is also supported by the surge in demand for its exports (dairy products) from China and a housing market boom.

Such strong fundamentals present an opportunity for the kiwi to repeat the successes of the early 2000s with a multi-year solid rise. At that time, the NZDUSD doubled within seven years. Although a second flight with the same amplitude is unlikely, the bulls have a 0.73-0.75 area in sight in the short term and a renewal of historic highs near 0.90 in the perspective of a couple of years.

The FxPro Analyst Team