During December, the kiwi reached levels last seen in 2011, but was unable to sustain them. NZD/JPY is the currency pair of the year. On one hand, a relatively hawkish statement by the RBNZ pushed the pair higher, but a weak GDP figure and a big current account deficit kept the pair from rising.
During January, the important figures to watch are the release of CPI in the middle of the month and the rate decision at the end of the month.
* This article is part of the January 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.
New Zealand enjoys a non-zero interest rate of 2.5%, and it seems unlikely that the RBNZ will lower this rate anytime soon. The recent statement did express some dissatisfaction by the value of NZD but had a generally positive outlook for the local and global economies.
In addition, New Zealand enjoyed the announcement about QE4 in the US: more USD that flows into risk currencies and commodities is certainly positive for the kiwi. And even if “QE Infinity” is not really going to infinity and perhaps not even up to 2014, this will likely continue boosting NZD, even as the US economy improves.
The economy probably improved in Q4, as Q3 was weak: the economy grew by only 0.2%, half the early expectations. In addition, Q2 growth was revised to the downside.
CPI is of high importance now as it will impact the next rate decision: CPI is released only once per quarter in New Zealand. Any uptick in inflation will make the tone more hawkish.
NZD/USD Technical Outlook
- NZD USD January 2013 Forex Forecast – Click image to enlarge
NZD/USD broke above the 0.8360 line and peaked at 0.8476 – a level last seen in the summer of 2011. It also broke above the 0.8470 line and downtrend resistance. However, the gains didn’t hold and the pair fell sharply. Another challenge of downtrend resistance could be more successful in January.
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. The pair temporarily breached this line, but didn’t go too far. 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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