NZD/USD consolidating gains at 20-month highs near 0.6900

• NZD/USDrallies for the eighth consecutive day to reach 0.6900 highs.
• The kiwi remains strong after RBNZ's monetary policy decision.
• NZD/USD to consolidate between 0.70/0.75 – MUFG.

The New Zealand dollar remains unstoppable, extending its rally against the US dollar for the eighth consecutive day to test prices above 0.6900 for the first time since early April 2019. The pair has lost momentum during the US session although it remains supported above 0.6875.

Kiwi ignores the dovish RBNZ message

The NZD/USD rally has been unfazed by the Reserve Bank of New Zealand’s slightly dovish message, reiterating their willingness to provide further monetary stimulus to the economy in order to meet their employment and inflation targets.

The RBNZ has maintained its benchmark interest rate unchanged at 0.25% and the target of its Large Scale Asset Purchase Program at NZD100 B. The biggest change has been related to the prospect of negative interest rates, looking now less likely on hopes of a vaccine in the mod-term. This and the comments about the resilience of the economic data have provided a fresh impulse to the NZD today.

NZD/USD heading back to a 0.70/0.75 range – MUFG

The FX analysis team at MUFG banks sees the kiwi appreciating higher to consolidate above 0.70: “New Zealand’s 2-year government bond yield has surged 10bps as negative rate expectations have been reduced. NZD/USD looks to be heading back into a 0.7000-0.7500 range. We doubt this will fuel too much concern within the RBNZ given the brightening prospects for 2021 and given NZD on a TWI basis has been trending lower for 6 years now and is some 12.5% below the peak in 2014. As long as the NZD advance is not rapid, there is upside scope from here.”

Technical levels to watch