NZD: Rate Hike Already Priced In, TD Maintains Bearish Stance

TD Securities FX strategist Howard Du said in a latest report that he maintains a bearish bias on the New Zealand dollar. The core logic is that the market's previous optimism toward the NZD was largely driven by expectations of continued rate hikes by the Reserve Bank of New Zealand, but this positive factor has now been largely priced in. Meanwhile, speculative positioning in the NZD has normalized from previously extreme levels, reducing the momentum for further upside.

**AUD/NZD Expected to Find Support**

On the cross, TD Securities expects AUD/NZD to continue finding solid support above the 1.20 level and maintains its year-end target of 1.22. This view is based on changes in New Zealand's domestic fundamentals. Reports show that easing inflation and a rising unemployment rate in New Zealand are weighing on market expectations for more aggressive monetary tightening by the central bank, thereby putting pressure on the NZD.

**NZD/USD Faces High Hurdle to Sustain Gains Above 0.60**

Despite recent fluctuations in the broader US dollar trend, TD Securities believes the hurdle for NZD/USD to sustainably trade above the 0.60 level remains high. The strategist noted that current long USD positioning in the market reflects that investors have already priced in a risk premium for a potentially hawkish Federal Reserve policy. According to data from the Commodity Futures Trading Commission, speculative FX traders' bullishness on the US dollar has reached multi-year highs, which limits the room for non-USD currencies like the NZD to sustain a rebound. At the time of writing, AUD/USD was trading around 0.71937.