FXStreet (Barcelona) - The Westpac Team remains bearish towards the NZD and forecasts the NZD/USD pair to target 0.7450 levels over a multi-month horizon, further anticipating NZ CPI to register a 0.9% yoy print, below the RBNZ’s target band of 1%-3%.

Key Quotes

“The most important NZ data release next week will be the Q4 CPI report on Wed. We expect a 0.9% yoy outturn, on the heels of Q3’s 1.0% and thus remaining around the bottom of the RBNZ’s target band of 1%-3%. However there should be little impact on policy settings because the RBNZ looks through transient factors. Other releases include the NZIER business opinion survey (Wed), manufacturing PMI (Fri), and monthly consumer confidence (Fri).”

“We remain bearish towards the NZD over a multi-month horizon, targeting 0.7450 which is near the 2012 low.”

“Dairy commodities are unlikely to see material price appreciation until late this year, and a drought is starting to take hold in major dairy region Canterbury which could impact production volumes this season and next. NZ inflation remains low and the outlook grim.”

“If the US dollar remains strong, NZD/USD should test the 0.76 support level. Our preferred vehicle for bearish NZD trades, though, is AUD/NZD, having probably made a multi-year cycle low at 1.0350 earlier this month.”