NZD/USD: 21-D SMA capping the bullish attempts, plenty to monitor this week

• NZD/USD:  on the verge of breaking up out of the consolidative mode.
• NZD/USD:  Farm-gate returns in the dairy sector remain favourable for the Kiwi.

NZD/USD is up to test the 21-D SMA at 0.6955, climbing along the rising support line in the correction of the 0.6850 lows. NZD/USD is currently trading at 0.6939 with a high of 0.6960 and a low of 0.6917.  

NZD/USD is on the verge of breaking up out of the consolidative mode with this move, although it needs to get up to the 0.7020 level which may require a flow of disappointing US data this week, (ADP jobs/GDP and nonfarm payrolls), although the dollar is in a strong bull trend with little signs of a correction. The June hike remains on the cards and the DXY is supported between a range of 93.86 – 94.50 today so far.

Locally, for New Zealand, Adrian Orr’s first Financial Stability Report this week offers plenty of catalysts to throw the Kiwi around as well.  

“We expect to see consolidation for now, but with an ongoing ‘sell on rallies’ bias,”

the analysts argued.

Farm-gate returns in the dairy sector remain favourable

The analysts  also explained that conditions for farm-gate returns in the dairy sector remain favourable:  

“Broadly, we see global milk supply growing at, or slightly below, trend. This should support the durability of the current pricing cycle, but as always, weather developments – especially in Europe and New Zealand – will be important in determining the final outcome. The other support factors are forecast solid demand from a range of key markets and a lower  NZD. We anticipate a milk price of $6.75/kg MS in 2018/19, which, despite higher expenditure, will support a solid earnings backdrop.”

NZD/USD levels

Support comes in at 0.6906 and 0.6920, (10-D SMA at 0.6914). To the upside, 0.6960 and 0.6980 mark key levels of interest, (21-D SMA 0.6955) ahead of 0.7080. However, NZD/USD remains below the 200-month moving average resistance at 0.6980 and weekly technicals remain bearish. RSIs are biased to the downside. Below 0.6850, 0.6780 comes as next downside target meeting the lows of mid-Nov 2017.