NZDUSD tests 1, ½-month highs at 0.6000 as the US dollar dips

• The kiwi appreciates to 0.6000 amid broad-based dollar weakness.
• USD dives on speculation of a Republican victory in the mid-term elections.
• NZDUSD might appreciate to 0.6500 in 2023 – ANZ.

New Zealand's dollar bounced off the 0,5925 area earlier during Tuesday’s US session, to breach the top of the previous days' trading range, around 0.5950, and reach levels near 0.6000 for the first time since mid-September.

The US dollar dives as the Americans vote

Market speculation about a Republican victory in the mid-term elections has been welcomed by investors. US stock markets have extended gains after a lukewarm opening, with the US dollar and US Treasury bonds losing ground.

The first polls are anticipating a Republican win that may bring Congress to a gridlock. This scenario is expected to complicate the approval of the stimulus measures projected for next year, which would ease pressure on the Federal Reserve to keep ramping up interest rates.

The US dollar Index has dropped nearly 0.9% during the US session to hit six-week lows at 109.40, with the 10-year US Treasury yields retreating from 4.22% to 4.13%.

US stocks, on the other hand, are going through a solid advance, following a mixed opening. The Dow Jones Index trades 1.5% higher, while the S&P Index advances 1.2% and the Nasdaq Technological Index moves 1.5% above the opening levels.

NZD/USD expected to reach 0.65 in 2023 – ANZ

In the long run, FX Analysts at ANZ observe a bullish potential on the pair and point out to a 0.65 target: “With the RBNZ expected to hike by 75 bps at the next two meetings, and the Fed expected to slow the pace of hikes, the NZD has scope to regain some lost ground (…) “One other string in the NZD’s bow is the gap between its current level and fair value, which we see at around 0.65. Our forecasts have this gap slowly closing over coming quarters, taking the NZD to fair value by the end of 2024.”

Technical levels to watch