The New Zealand dollar reached new lows but certainly managed to recover, thanks to the RBNZ. We now have quarterly GDP among other events in a busy week for the kiwi. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The central bank of New Zealand surprised by both maintaining its hiking bias and also by hiking its growth forecasts. This acknowledgement of the economy’s strength gave a boost to the kiwi, that reversed its earlier losses. The currency was also supported by the sell off in the US dollar, a move that followed the big strength seen after the Non-Farm Payrolls.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- GDT Price Index: Tuesday, exact timing is unknown. The Global Dairy Trade also known simply as the price of milk, is critical to the kiwi as dairy products are the main exports for the nation. The auction is released every two weeks, and in the past three releases, the price has dropped. After a slide of 1.1% last time, a bump up is likely now.
- Current Account: Tuesday, 21:45. After one quarter of a surplus, New Zealand returned to a deficit in Q2 2014. The net difference between the value of all imported and exported goods, services and basically everything is likely to see another negative quarter in Q3 with an even wider deficit of 5.32 billion.
- GDP: Wednesday, 21:45. This is the widest measure of economic activity. New Zealand’s economy last contracted in 2010 and has enjoyed uninterrupted growth since then. In the second quarter, growth was stronger than expected with +0.7% quarter over quarter. The exact same 0.7% q/q growth rate is predicted for Q3 2014.
- Visitor Arrivals: Thursday, 21:45. The tourism sector is also important for the economy, making this measure meaningful for the currency. New Zealand enjoyed a growth rate of 3.3% in October, and has likely enjoyed more growth in November, during the local springtime.
- ANZ Business Confidence: Friday, 00:00. This highly regarded survey of 1500 businesses has peaked at a multi-decade high of over 70 points early in the year and has fallen since then. After bottoming out in September at 13.4 points, it climbed to 31.5 in November. A similar number is expected now.
- Credit Card Spending: Friday, 2:00. With retail sales published only once per quarter, this measure of consumption provides up to data. A year over year growth of 6.7% was seen in October and we are now expecting a slightly slower growth rate.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar started the week with a downfall and a test of downtrend support (mentioned last week). It then bounced back up very nicely, reaching 0.7874 before sliding a bit.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
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 initial September low of 0.8120.
0.8075 was one of the cycle lows and now works as resistance. 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.
0.80 is now key resistance on the upside. Just below, the old resistance line of 0.7975 is coming back to play after capping the pair in October.
0.7930 was a double top in October’s recovery and is important to watch. It is followed by 0.7850.
0.78 is a round number and provided support various times, including recently. Going deeper, 0.7765 worked as support, and is a line to watch now on the way up.
0.7715 is stronger support after serving holding the pair in December. 0.7660 is the new low in November 2014, making it key support.
Below this point, we are back to levels last seen in 2012: 0.7615 is initial support and the critical line is 0.7460.
Wide downtrend channel maintained
As the thick black lines show, the pair is trading within a wide channel that is heading down. The bottom of the channel was tested in December and held up very well.
I am neutral on NZD/USD
Both the US and New Zealand economies are on an upwards trajectory and for this week, these forces could be balanced. GDP in New Zealand could remind us of the strength of the local economy, but weakness in milk prices could counter that. Also in the US, the last Fed decision is likely to ascertain the hiking bias in 2015, but with a sense of caution.
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- 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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