According to Greg Gibbs, Director at Amplifying Global FX Capital, the NZD/USD appears to have broken out of rising trend in place since mid-2015, and now developing a declining trend.

Key Quotes

“Its fall in the last week or so has been persistent and rapid, suggesting a significant shift in sentiment is taking hold. Global equity markets appear more fully priced for a stronger global economy and are now vulnerable to rising US interest rates and global yields. Similarly, demand for higher yielding currencies like NZD may fade. Global commodity prices have turned lower in recent weeks, especially milk prices.”

“The NZD appears very expensive compared to its narrowed yield advantage. In a rising global yield environment, the NZD may begin to under-perform and reconnect to its now small yield advantage. High levels of household debt represent a higher risk for the New Zealand and Australian economies in a rising yield environment. There would be no tears shed by the RBNZ or NZ government if the NZD fell sharply from current levels.”