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New Zealand dollar price forecast 15 November 2020

2020-12-15

2020-12-15

Kiwi is following the yuan up. Forecast as of 15.12.2020Dmitri Demidenko

The New Zealand dollar could be the best performer among G 10 currencies in 2020. There several reasons, such as the support by China and the commodity market, the success of the New Zealand economy, and medicine. What will change in 2021? Let us discuss the NZD outlook and make up an [NZDUSD][1] trading plan.

Monthly fundamental forecast for New Zealand dollar

If the Chinese yuan can grow against the dollar up to the highest level since 1993, why not the New Zealand dollar continues the rally versus a basket of world major currencies? The trading idea suggested in the [mid-November ][2]to buy the [NZDUSD][1] with the targets at 0.705 and 0.72. However, some investors may think the uptrend is exhausting. May the New Zealand GDP report for Q3 convince them otherwise?

According to Citigroup, the high demand for the yuan-backed assets will be supporting the yuan during the entire year of 2021. As a result, the [USDCNH][3] pair should be down below 6. That was the level last seen 27 years ago. What is good for the renminbi is good for the kiwi. About 30% of New Zealand exports go to China, so the Chinese economy’s growth is a positive factor for Wellington. That is why the kiwi and the yuan are positively correlated.

Dynamics of NZDUSD and USDCNY

Source : Trading Economics

Beijing managed to defeat COVID-19. Furthermore, China’s manufacturing increased by 7%, retail sales – by 5% in November, and the fixed-asset investment went up 2.6% in the first eleven months of the year. Therefore, the OECD forecast suggesting China’s economy’s growth by almost 10% in 2021 compared to the fourth quarter of 2019 is likely to come true.

Wellington also managed to deal with the pandemic effectively. Besides, there is a tailwind from China and the commodity market, as well as a lower chance of the interest-rate cut by the Reserve Bank of New Zealand, which lays a strong foundation for the [NZDUSD][1] uptrend. Six weeks ago, financial markets were fully confident that the cash rate would drop to -0.25% in 2021. Currently, the chances of such a scenario are estimated at 30%. The sharp rise in property prices could be the reason. The money has never been as cheap as now, and the housing prices soared. That is why New Zealand’s prime minister, Jacinda Ardern, asked the RBNZ to take some measures to prevent growing social inequality among the people in New Zealand.

Dynamics of commodities

Source : Financial Times.

The NZD could follow the AUD trend, which soared after the report on the Australian GDP for Q3. Bloomberg experts suggest the New Zealand economy should expand by 12.9% in the July-September period, following the drop by 12.2% in the April-June period. Better than expected data could give a new momentum to the [NZDUSD][1] uptrend. After all, I believe the kiwi price is quite a dependant on the foreign environment. Therefore, a decline in the global risk appetite could result in a short-term correction, while the medium- and long-term NZD outlook remains bullish.

Monthly [NZDUSD][4] trading plan

Before Christmas, there will be uncertainty in the financial markets because of Brexit, adopting the fresh fiscal stimulus by the US Congress, and a potential trade war between China and Australia. Therefore, the US stock indexes, as well as the commodities, could be corrected down, pressing the [NZDUSD][4] also down. That is good! Traders will have a chance to buy the pair at a lower price and set the targets at 0.72 and 0.73-0.735.

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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  1. my.liteforex.com/trading/chart?symbol=NZDUSD&returnUrl=true
  2. www.liteforex.com/blog/analysts-opinions/five-reasons-to-buy-kiwi-forecast-as-of-12112020/
  3. my.liteforex.com/trading/chart?symbol=USDCNH&returnUrl=true
  4. my.liteforex.com/ru/trading/chart?symbol=NZDUSD&returnUrl=true