The kiwi is usually a sensitive currency to “risk on / risk off” moves. However, in November is proved to be more stable.
Recent figures point to signs of weakness, but this could reverse during December, when the RBNZ convenes for a rate decision and GDP is released.
* This article is part of the December monthly forex report. You can download the full report by joining the newsletter in the form below.
- Bad employment report: New Zealand publishes employment data only once per quarter. The report for Q3 was a big disappointment: a drop of 0.4% in employment and leap of the unemployment rate from 6.8% to 7.3%. This hurt the New Zealand dollar.
- Weak retail sales: Also here, the quarterly report was a big disappointment – -0.4% in sales and -0.3% in core sales, much worse than expected.
- Bigger trade deficit: New Zealand’s trade balance deficit didn’t drop as expected but remained high, at 718 million.
- No oil in the sea: there were attempts to find oil in deep sea near New Zealand. However, the company that drilled, Brazil’s Petrobras, pulled out of the drills and surrendered its permit off the Raukumara Basin.
Nevertheless, the central bank is not expected to cut the interest rates as the economy is still doing well and as the Chinese economy partially depends, has stabilized. The new head of the RBNZ, Graeme Wheeler doesn’t seem to be very different from his predecessor Alan Bollard.
Without a rate cut, it is hard to see how much the kiwi could fall. NZD could strengthen during this month after the past disappointment.
A lot depends on the GDP report: lower expectations are already priced in, so if there isn’t a huge disappointment, we could see it rise.
The only thing that could hurt the kiwi is further talk of intervention to weaken the currency. While this remains a very distant option, previous complaints by the central bank about the strength of the kiwi had an impact.
NZD/USD Technical Outlook
NZD/USD traded in a more narrow range, closer to downtrend resistance. Downtrend resistance, which began early in the year, remains important. Also note the long uptrend support line, which began in early 2011.
Lines
The round number of 0.90 is in uncharted territory. The float-era high of 0.8842 is the ultimate resistance line.
0.8470 was the peak in 2012 and remains key resistance. 0.8360 was a very impressive cap to the pair during September 2012 and is a key line on the upside.
0.8175 worked well as support during September 2012 and is only minor now. 0.81 is the bottom of the current range, after working as such several times in recent months and also at the beginning of the year.
0.7975, which was a veteran peak back in 2010 returns to play a significant role as the pair stabilizes above the line. A loss would open the door for bigger falls. The round number of 0.78 worked as support in early 2011 and also in mid-2012 and is the next line.
0.7650 capped the pair on recovery attempts and also worked as resistance in 2009. 0.7450 was a stubborn bottom in May 2012 and was also a swing low in the fall of 2011.
0.7350 is significant on the downside. The pair got close to this line during Q4. The round number of 0.71 was a swing low in 2011 and a break lower would be a bearish signal. Under the round number of 0.70, the next line of support is 0.6815, which worked as such in early 2010.
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