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NZDUSD forecast for 09.06.2020

June 9, 2020

June 9, 2020

Kiwi celebrates victoryDmitri Demidenko

New Zealand got benefits in the economic recovery due to the victory

over coronavirus

[In late March][1], I recommend buying the New Zealand dollar, and I could have been criticized by many analysts. The [NZD/USD][2] pair was trading close to its 11-year low, the stock indexes showed no signs of growth, and the concerns about global recession encouraged investors to buy safe havens. However, I was right then. The Kiwi has been 10% up versus the US dollar, and it is even the leader among G10 currencies in June. The factor of China’s economic recovery as the main market for New Zealand goods has worked, hasn’t it? Is it time to harvest?

I have stressed many times that a good trade must be based on an investment idea. For example, I assumed that a lower lockdown stringency in Canada and Australia suggested [buying the CAD and the AUD][1]. However, the stringency of the social isolation policies gives a clue on how fast an economy can rebound. New Zealand won the battle with COVID-19, and the [NZD/USD][2] has been up to its four-month high, and the S&P /NZX 50 has been the first among the stock indexes in the Asia- Pacific region to enter the green zone since the beginning of the year. The New Zealand stock market has been 36% up from the lows hit in March.

Dynamics of S &P/NZD 50

![LiteForex: NZDUSD forecast for 09.06.2020][3]

Source: Bloomberg

New Zealand Prime Minister Jacinda Ardern says the country has united in unprecedented ways to defeat the virus. Now, the country has a benefit in the economic recovery. A seven-week lockdown ended on May 14, there haven’t been new coronavirus cases since then. So, New Zealand is one of the first to be officially declared virus-free, and its economy will be one of the most open in the world.

Yes, New Zealand has done a lot and lost a lot. According to the projections of The Reserve Bank of New Zealand, which has aggressively cut the rates and launched the QE worth NZ$60 billion, the GDP will contract by 21.8% in the second quarter. Considering the drop by 2.4% in the January-March period, New Zealand is to slide into a recession for the first time since 2010. However, I believe this factor was already worked out in early spring. Besides the talks about the fast rebound of the New Zeland economy have supported the [NZD/USD][2] bulls in the May- June period.

The foreign environment is also favorable for the Kiwi, as China’s economy is recovering and the US stock indexes are trading up. China’s foreign trade surplus reached a record of $62.9 billion in May, and the Caixin report on the manufacturing and services PMIs has exceeded the forecasts and is up above the important level of 50, which signals economic expansion. The only barrier to Chinese growth could be set by Donald Trump. The US president might escalate the trade war, but the fallout must be negative. It could result in the S&P 500 sale-offs, which is not good ahead of the presidential election. I believe, the risk of the US stock market correction increases, which encourages traders to exit the [NZD/USD][2] longs [entered in March][1]. However, the correction will hardly be deep, so it makes sense to buy the Kiwi on a drawdown with the middle-term targets at $0.675 and $0.685.

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Price chart of NZDUSD in real time mode

![Kiwi celebrates victory][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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