Summary:
- An outbreak of disease amongst cows in New Zealand threatens to disrupt the dairy trade
- The New Zealand dollar is under pressure as milk is the country’s biggest export
- Disease contained for now but an outbreak could see sharp declines
The New Zealand dollar is falling against most of its peers today as news spreads of cows in South Canterbury testing positive for a disease that had previously never been found in the country. The Canadian dollar is the biggest gainer against the Kiwi, but there is also a notable rise in both the Aussie and the pound.
The New Zealand dollar is dropping against all of its major peers barring the JPY which is little changed on the day.
The foreign disease is called mycoplasma bovis and can cause udder infections, pneumonia and arthritis. 14 cows so far have tested positive for the disease and around a further 150 have shown signs that they may also be infected. The movement of stock has been stopped form the effected property in an effort to contain the outbreak, with no signs at the moment that the disease has spread.
However with the disease believed to be highly contagious amongst cattle (it does not infect humans and presents no food safety risk according to the New Zealand Ministry for Primary Industries) there are some concerns that it could not be an isolated incident.
As for crosses where there is the potential for gains against the New Zealand dollar, the US dollar is an obvious place to look. Last week saw a strong move higher in the NZDUSD, with the pair ending the week at its highest closing level in more than two years. The market however did find some sellers last September when it peaked at 0.7485 and whilst price remains below here this could be a level to watch for potential resistance. As for levels to look out for on the downside the prior resistance at 0.7335 could attract sellers and it’s not until the market has broken back under there that shorts will see the chance for a significant decline.
The NZDUSD has pulled back in recent sessions after closing on Friday at its highest weekly level in more than two years. 0.7335 could be a key swing level to watch going forward