- NZD/USD has broken higher to trade at 0.6620 at the time of writing, printing a high of 0.6622 so far from the day’s low of 0.6541.
- The US dollar is on the backfoot into the Jackson Hole with the DXt down to test below the 93 handle.
Short-covering and improved risk appetite is the catalyst as markets anticipate a lower-for-longer theme from this week’s Jackson Hole event.
The reflation and declining real yields narrative will be weighing on the greenback into what is expected to be confirmed from Powell tomorrow.
The DXY is already looking to the bottom of the abyss and a break of 92.13 could spell the next leg of the bear dollar cycle, targeting 90.93.
On the other hand, a correction to the upside opens risk back to 94.80 ahead of a 38.2% Fib confluence above 96.00,
RBNZ in focus
However, the bird has its own troubles ahead as traders look towards the domestic OCR and prospects for negative rates.
Local factors matter for the NZD and readers will be well aware of our views around the outlook for RBNZ policy and the headwinds that stem from that for the NZD,
analysts at ANZ Bank explained.
But against a backdrop of renewed USD weakness, even that may not be enough and we will experience episodes of strength.
The post-COVID high is still a cent above us; if we break above it, fresh reflection will be required. NZD price action will be frustrating a lot of people, not just the RBNZ.