All of it is directly related to the flexibility of New Zealand that is usually oriented on dairy trade, but every time something goes wrong, it pressures the national currency, and lets the service sector blossom.
Right now we came too close to the roof of the mentioned range, and there are chances of a deep correction in the nearest future. Actually it may occur tonight.
Everything goes fine in the national economy, but there are some wake-up calls that make me think of a selloff. First, the recently published GDP data turned out much weaker than expected, meaning the market was too optimistic.
Second, dairy products pricing. Every Tuesday night we get the Global Dairy Option data, and during the last 7 weeks we saw the prices growing except for the last one. Last Tuesday we got to know the price fell 0.8 per cent for the first time during 1.5 months. And tonight we are going to see an update.
If the weekly auction data shows the prices falling again, it may trigger a broad-based selloff of the kiwi. NZD/USD may sharply fall down with the nearest target at 0,7200.
Senior Analyst at Capital Markets