Retail sales and the all-important CPI are the major events that will rock the kiwi this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.
NZD/USD daily chart with support and resistance lines. Click to enlarge:
The kiwi advanced after crossing the round number of 0.70. It’s further steps depend now on inflation, which will determine the outcome of the next rate decision. Let’s start:
- FPI: Published on Monday at 22:45 GMT. This monthly gap fills the gap that the government creates by releasing inflation figures only once per quarter. The prices of food, which fell in the past two months, is expected to rise this time. This will be an indicator for the CPI released later in the week.
- Retail Sales: Published on Tuesday at 22:45 GMT. Consumers disappointed in the past three months. Sales grew less than expected, or fell more than expected. This important indicator hurt the kiwi. After a drop of 0.6% last month, a rise of 0.6% is predicted now. Also note core retail sales, which fell by 0.2% and are likely to rise by 0.6% now. We’ve seen a strong impact when retail sales fell two months ago.
- Business NZ Manufacturing Index: Published on Wednesday at 22:30 GMT. This survey of manufacturers fell from the peak it reached two months ago and dropped from 58.6 to 54.5 points. Another drop is expected now, but the number will probably remain above 50, meaning economic expansion.
- CPI: Published on Thursday at 22:45 GMT. A rise in the consumer price index is the key to an intense tightening cycle by the central bank, that already began. Last quarter’s rise of 0.4% will probably be followed by a rise of 0.5% this time. A jump above 1% will boost the kiwi.
NZD/USD Technical Analysis
The kiwi continued struggling with the 0.6910 line at the beginning of the week, but then made a strong move upwards and broke above the round number of 0.70 to close just under 0.71.
NZD/USD’s range is between the round support line of 0.70 and the next resistance line of 0.7160, which was a stubborn top during June. The next line of resistance is at 0.72, which capped the kiwi in the past.
Higher, May’s highs of 0.7325 provide the next strong resistance line. This was an area of resistance also in December. The last line of resistance is at 0.7440, which was a peak at the beginning of the year.
Looking down below 0.70, 0.6910 provides the next support line. It has been a pivotal line recently. Lower, 0.68 provides support very recently and also in February, and is the next line of support.
There are many lines below, but the most notable one is 0.6560, which was the year-to-date low.
I remain bullish on the kiwi.
With a stable, growing economy, and with a cycle of rate hikes that already began, it’s likely to gradually rise.
- For a broad view of all the week’s major events worldwide, read the forex weekly outlook.
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- For USD/CAD (loonie), check out the Canadian dollar forecast.
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