NZD/USD likely oversold, despite RBNZ rate cuts – CIBC

Analysts at CIBC, forecast the NZD/USD pair will trade at 0.64 during the fourth quarter and at 0.66 over the second quarter of 2020. 

Key Quotes: 

“NZD/USD has fallen rapidly since July, and looks to have reached cyclical lows at 0.62 in early October. The swing lower was largely due to the RBNZ, who cut rates to a record low of 1.00%. Despite these rate cuts, we believe that the NZD/USD is oversold.”

“The economic surprise index has remained relatively flat since employment numbers surprised to the upside in August, suggesting that New Zealand’s economy hasn’t changed significantly relative to expectations. Given that expectations have been considerably low, we believe that much of the negative news has already  been priced in for the year. Market positioning is supportive of our hypothesis, with net shorts reaching the highest level to date.”

“Over the next few months, we believe that the market is due for a short squeeze, especially as the RBNZ pauses to let the impact of looser monetary policy feed through to the real economy.”