Retail sales are the highlight of this week’s events in New Zealand. Here’s an outlook for the kiwi events, and an updated technical analysis for NZD/USD.
NZD/USD graph with support and resistance lines on it. Click to enlarge:
New Zealand’s only act in the currency war was skipping another rate hike, but this was done due to internal reasons as well. So, the kiwi is rising on its partial absence from the war. Let’s start:
- FPI: Published on Monday at 21:45. Export of agricultural goods are a major component in New Zealand’s economy, making the Food Price Index important. After a small drop of 0.1% last month, a rise in the same scale is expected now.
- Business NZ Manufacturing Index: Tuesday 21:30. This figure is similar to purchasing managers’ indices elsewhere. This indicator slipped below the critical 50 point mark last month, indicating economic contraction. The figure this time will probably be similar to that 49.3 point score.
- Retail Sales: Tuesday 21:45. This major consumer related figure is quite volatile – after a big 1% rise two months ago, it disappointed and dropped by 0.4% last month. Core retail sales aren’t more stable, also dropping after a big leap. Retail sales are expected to rise by 0.4% this time, and core retail sales by 0.2%. If both indeed go in the same direction, the impact on the kiwi will be strong.
* All times are GMT.
NZD/USD Technical Analysis
The kiwi began the week by testing 0.735, but quickly jumped higher, and stopped only short of 0.76 (a new line that didn’t appear last week). After a dip, NZD/USD closed at 0.7550.
Looking up, immediate resistance is found at 0.76, a round number which was almost the peak (0.7592) in the past week. Above, 0.7634 was a peak in October and is the highest level in two years.
Beyond, 0.7760 and 0.7920 are distant lines that were last seen in 2008. These lines are followed by the round psychological number of 0.80.
Looking down, immediate and minor support is found at 0.7523, the swing high from November 2009. Below, 0.7460 was a point of friction during September and now provides further support.
Stronger support is found at 0.74, which was a swing high in September and also capped the kiwi during September. More support is found at 0.7355 which capped NZD/USD in the summer.
Even lower, 0.73 and 0.72 also worked as support and resistance lines in recent months, and are far below.
I am bearish on NZD/USD.
The fundamentals of New Zealand don’t support such a strong currency. The current ride is based on US weakness. As the greenback will stabilize, the kiwi will drift lower.
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/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 forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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