Since the New Zealand First formed a coalition with the Labour Party a week ago, the Kiwi has suffered massive sell-off across the board due to weak business sentiment and uncertainty surrounding economic policy of the new coalition. Both widely perceived as anti-immigration.
Experts believe the anti-immigrant policy will hurt productivity and impede economic recovery. Hence, the surge in capital flight even with better than expected inflation number in the third quarter.
In the last 5 days, the NZDUSD lost 289 pips to trade below our 0.6892 targets. However, with the US improved economic outlook and the recently adopted 2018 fiscal budget, the US dollar is positioned to sustain its gains against the weak New Zealand dollar.
Also, until the new coalition announced its economic policy, this bearish trend is expected to continue towards 0.6716 targets as shown above. Therefore, we remain bearish on NZDUSD and will be looking to add to our position on a close below the 0.6813 support level.
