The New Zealand dollar suffered badly from the global stock market crash but managed to recover. What’s next? The dairy auction and business confidence are the highlights. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The crash of stock markets hurt the “risk” sentiment and the kiwi was certainly a victim, especially as the economy depends on Chinese demand. NZD/USD crashed to the 0.62 handle before rebounding. An improvement in sentiment, led by Chinese stimulus and a potential delay of the Fed hike helped the kiwi recover. However, it was not enough to mitigate all the falls. A lower than expected trade deficit didn’t help much either.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily graph with support and resistance lines on it. Click to enlarge:
- Building Consents: Sunday, 22:45. This monthly figure is a good indicator for the housing sector. After a fall of 4.1% in June, we can expect a rebound in July.
- ANZ Business Confidence: Monday, 1:00. After hitting multi-decade highs in 2014, this important survey of around 1500 businesses began a long fall, eventually reaching negative territory. A score of -15.3 seen in July reflects growing pessimism. A similar number is on the cards now.
- Overseas Trade Index: Monday, 22:45. The figure, aka as Terms of Trade serves as some evidence to the value of the kiwi: is it overvalued or undervalued? In Q1, terms of trade improved by 1.5%, within expectations. A drop of 1.9% is on the cards now.
- GDT Price Index: Tuesday, during the European afternoon. After long weeks of falls in dairy prices, a leap of 14.8% was seen in the previous one. Is this a change of course or just a one off? This publication will give us an indication. NZD responds sharply to this indicator.
- ANZ Commodity Prices: Wednesday, 1:00. Commodity prices certainly move the kiwi, and recently this has been negative. A fall of no less than 11.2% was seen in July and another crash is on the cards for August.
NZD/USD Technical Analysis
Kiwi/dollar started the week with a plunge and dipped below post crisis lows. The flash crash did not last too long but the pair certainly remained on the back foot, failing to reconquer the 0.65 level mentioned last week.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
0.7075 provided some support in May and is a weak level now. And of course, the very round level of 0.70 looms large and gave a fight before the pair continued south in June.
Further, the low of 0.6940 allowed for a temporary bounce. The round 0.69 level is switched positions to resistance.
0.6860 was a low point as the pair dropped in June 2015. It is followed by the 0.68 level that worked as resistance when the pair was climbing a few years back.
Close by, the July high of 0.6770 serves as resistance. Quite close by, the high of 0.6740 seen in July is another cap.
It is followed by the round level of 0.67 that is a pivotal line in the range. The now previous July low of 0.6650 was a multi-year low and the break below it was not confirmed.
0.6620 is the new 2015 low and for now serves as minor support. The post crisis low of 0.6560 is still of high importance.
Below, the round 0.65 level is of high importance now. The last line is 0.64886, which was the low both in July and in August – a double bottom.
The new post crash low of 0.6408 works as important support within the recent range. 0.6210 is the flash crash low. It is followed by 0.6160 that can be noted as a post crisis attempt to recover.
I am bearish on NZD/USD
Even with all the stimulus in the world, China is slowing down. In addition, there is good chance that the RBNZ will re-join the global currency wars and the state of the US economy is certainly positive.
In our latest podcast we explain what’s going on with EUR and China before previewing the big events ahead:
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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