NZD: Election run-in to see kiwi trade with a negative bias - ING

With speculative markets still significantly net long NZD and signs of any political risk premium yet to reach extreme levels, analysts at ING suspect a narrower focus on the 23 September elections could spell further weakness for NZD.

Key Quotes

“A US data-led recovery in US$ sentiment could see NZD/USD temporarily undershoot our 0.71 forecast for 3Q17 – with a break of the 200-DMA (0.7130) supporting this view.”

“Even worse, under a “perfect storm” of rising DM yields and greater domestic political uncertainty, we think NZD/USD could drop towards the 0.68-0.69 lows seen in 2017. Our view is that NZD looks vulnerable to greater downside, with US payrolls creating a potential opportunity. Domestic data docket see 2Q manufacturing data (Thu).”