Westpac (note from Imre Speizer in Auckland) is expecting the NZD/USD to continue falling over the next few months, target of 0.70. Reasoning? They cite (in summary):

1. US dollar showing signs of resuming its multi-year uptrend

  • Wpac expect US economic data surprises to improve

2. New Zealand economic fundamentals are strong, but will weaken a little from previously

3. Inflation is low, allowing the Reserve Bank of New Zealand to shift to a conditional easing bias

  • Market is selling the NZD on the back of this
  • As the US approaches Federal Reserve tightening, differentials are declining

4. Export sector weakness ... Declining dairy & log prices

  • These may well reverse, but there is much uncertainty

5. Currency valuation model puts the NZD below fair value, but scope to fall further

6. Technicals are bearish

  • Breakdown of a head-and-shoulders neckline at 0.7275
  • Targets 0.69
  • There's a near-term obstacle at 0.7190 to overcome since that level provided a base in March
  • Then historical supports at 0.7120 (March 2011) and 0.6950 (August 2010)

Westpac conclude that "We target 0.70 by September this year"