The second half of the North American trading day meandered along with very little fanfare for many trading instruments as market trends that started the day continued to persevere to the end of the day. Oil fell below $60 in WTI, the USD enjoyed a little bit of strength, and the NZD continued to get shellacked with reckless abandon. The reason why everyone is down on the kiwi to start the week has to do with the belief that the Reserve Bank of New Zealand will be cutting rates not once, but twice before the calendar turns to 2016; a nearly opposite belief of what was expected to start the year.
One currency pair where the devaluation of the NZD is moving quickly is the NZD/JPY. Tom Petty and the Heartbreakers penned a song many years ago that could be the theme song for the price action over the past couple weeks as this pair has fallen from around 92.00 to nearly 88.00 as we go to press; and the free fallin’ ways of this pair may not be done quite yet. Milestones set by previous price action could serve as support if this pair continues to fall, but even that may not be enough to turn the tide of opinion against the NZD.
The economic calendar likely won’t give the NZD any relief in the near term either. The RBNZ’s Financial Stability Report and a speech by Governor Graeme Wheeler outlining the report are scheduled for tomorrow, and it will likely contain many allusions to the lack of inflation in New Zealand. The combined effect of changing opinion about the yield possibilities of the NZD and the potential substantiation of that belief could serve to accelerate this free fall, and eventually lead to market commentators discussing 2015 lows in the coming weeks.
