The New Zealand dollar was under the heavy hand of the US dollar once again, reaching new lows and even falling below the slippery downtrend support line. The major event of the week is the release of quarterly GDP. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The US dollar dominated another week, shrugging off some unexciting data and advancing against the weak and strong currencies alike. The kiwi suffered from the central bank: the recent fall in NZD/USD is probably not enough for Governor Wheeler, which wants even more, as he stated in the press conference.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- Current Account: Tuesday, 22:45. New Zealand enjoyed a current account surplus of 1.41 billion in Q1, breaking a streak of deficits. This time, for Q2, the country might slip back into a deficit, and this could weigh on the kiwi.
- GDP: Wednesday, 22:45. For three consecutive quarters, the economy grew at a pace of 1% or higher. In the first quarter, a quarterly growth rate of 1% was seen. Strong GDP growth was also behind the series of rate hikes. While growth probably continued in the second quarter, it probably slowed down to 0.6%.
- Visitor Arrivals: Thursday, 22:45. After commodity exports, tourism also plays a significant role int he economy, making the number of visitors important for New Zealand. A slide of 0.5% was printed in July, and a rise is likely this time.
- Credit Card Spending: Friday, 3:00. As retail sales are published only once per quarter, this measure of spending by consumers provides an indication about the state of the consumer and the economy. A y/y growth rate of 4.5% was seen in July, and we could see a slower growth rate now.
- Elections: Friday. Kiwis go to the polls amid a strong economy and solid leadership by Prime Minister John Key. According to recent polls, Key is in the lead and is expected to win the elections and form another minority government. An outcome of continuity and a decisive vote will be positive for the kiwi, while a political limbo would hurt the currency.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar started the week with a small gap, that was quickly closed. However, once the pair lost the 0.8312 line (mentioned last week), it struggled to recover.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
We start from lower ground this time. The round number of 0.85 returns to the chart and now defines the top of the range. 0.8430 is a low seen in early August 2014 and significant support at the bottom of the range at that time.
The round number of 0.84 was a swing low in June and also capped the pair in August. It is followed by 0.8350, which was the low recorded during August.
0.8312 was the low point in August 2014 and it also follows the downtrend support line. The next line is 0.8270, which was the low point in September.
Further below, the round levels of 0.82 is certainly worth watching. It is followed by the September low of 0.8145.
The round number of 0.81 is the next line after working as support beforehand. Even lower, 0.8050 provided support for the pair back in February and is the last line before the very round figure of 0.80.
Downtrend support broken
As the black line shows, the pair is trading alongside downtrend support since the end of July. This line worked perfectly well and allowed the pair to bounce back. However, the recent test was already too much to cope with, and the pair fell below this line.
I turn from bearish to neutral on NZD/USD
The recent deterioration, accelerated in part by the fall of the Aussie, seems exaggerated. The economy in New Zealand is still doing well and we may certainly get a reminder of this in the GDP report. In addition, the Fed is not likely to be in a rush to change its tone.
And subscribe on iTunes.
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.