NZD/USD heading for 0.6733: Where next for the currency pair?

Justin Freeman

The New Zealand dollar has been labelled by some analysts as one to watch in the coming weeks.

At the start of the coronavirus pandemic, New Zealand was labelled a tentative success story.

While the country did manage to tackle the virus head-on, it has now been faced with a second wave.

The country’s government has now brought in restrictions on its economy, including a two-week lockdown.

This week, it was announced by the country’s Prime Minister, Jacinda Ardern, that the planned September general election would not go ahead at the scheduled time.

Instead, it will now be held in October, which runs the risk of creating some political instability.

This could, on the face of it, appear to pose a threat to the value of the currency.

However, the reality is that the New Zealand dollar is still seen by some analysts in a fairly optimistic way.

Ardern’s approach of taking swift measures early on to tackle the virus appeared to work last time.

In Q2 2020, for example, the country’s rate of unemployment went down by a fifth of a percentage point at a time when other countries were facing severe problems in that regard.

If traders suspect that this lockdown could also pave the way for a similarly strong second recovery, then the New Zealand dollar might well continue to be held in high esteem.

The NZD/USD is largely seen as a bullish pair at the moment when underlying sentiment-related considerations are taken into account.

It is even believed that the pair could start to approach the level at which it kicked off the year, prior to the global spread of the pandemic.

This level, 0.6733, is now considered to be back in play.

Aside from these considerations, there are also a number of events to come on the economic calendar this week and next week.

On Friday of this week, for example, attitudes of consumers in the country will be brought into sharp focus when credit card spending levels for July are published at 3am GMT.

These will be shown year on year, and were last recorded at -9.2%.

At present, there is no firm view on what the measure might show this time around.

On Sunday, meanwhile, there will be a retail sales release for Q2 2020 out at 10:45pm GMT.

On a quarter-on-quarter basis, this figure was last recorded at -0.7%.

Again, there is currently no consensus on where it will go next.

It will, however, be closely watched by traders who will be looking to see whether the strong performance of the Kiwi labour market during that period will be matched here.

At the same time, the metric will also be published with cards excluded from the equation.

Justin Freeman

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