Bank of America has added U.S. dollar short positions as the balance of risks shifts, and it is telling clients to buy NZD/USD with an entry at 59.57, a target of 0.62, and a stop at 0.58, backed by a hawkish Reserve Bank of New Zealand outlook.
Bank of America has added U.S. dollar short positions, saying the distribution of risks has shifted despite high uncertainty. The bank's dollar outlook now rests on both U.S. Treasury and Federal Reserve policy credibility.
The firm does not expect the Treasury to abandon its multiple efforts to contain borrowing costs, including foreign exchange intervention and long-end buybacks. Accommodative financial conditions, it said, make short dollar positions against high-beta currencies likely to perform in the near term, particularly if the Fed absorbs higher bill issuance.
Bank of America recommends buying NZD/USD with an entry at 59.57, a target of 0.62, and a stop at 0.58.
The bank is bullish on the New Zealand dollar into the fourth quarter, pointing to a hawkish Reserve Bank of New Zealand, and sees two rate hikes from the RBNZ. Weather-driven risks to global food supply chains also support the New Zealand dollar outlook, the bank said.
Source: Investing.com
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