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The  New Zealand dollar  reached news highs and topped the 0.70 level but eventually turned down and closed on lower ground. The big event for this week is the rate decision. Will the RBNZ act against the strength of the kiwi?  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

The Doha Disappointment was followed by a big rebound in commodity currencies that sent the kiwi to high levels unseen for quite some time. Also the beat on quarterly inflation, at 0.2%, was good news for NZD. The US dollar later recovered and the kiwi returned to the drawing board.

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NZD/USD  daily graph  with support and resistance lines on it. Click to enlarge:

NZDUSD technical chart April 25 29 2016

  1. Trade Balance:  Tuesday, 22:45. New Zealand enjoyed another month with a surplus in the trade  balance, which advanced to 339 million. An even bigger positive number is on the cards now: 405 million.
  2. Rate decision: Wednesday, 21:00. The Reserve Bank of New Zealand  discovered a leak in its previous decision and will refrain from providing early access to the data. Does this imply a cut? Not necessarily, but the recent strength of the kiwi is certainly undesired. At a minimum, Graeme Wheeler and his colleagues are expected to talk down the value of the exchange rate, leave the door open for interventions and for further cuts. They might counter this with further macro-prudential moves to cool the housing market.
  3. Building consents:  Thursday, 22:45. Approvals for building new households have leaped 10.8% last month. Despite the volatility of this indicator, it still provides a good snapshot of the housing sector.
  4. ANZ Business confidence: Fruday, 1:00. Business confidence has been falling in the past two months and has reached the low level of 3.2 points in March. While this is still optimistic, it does not bode too well for things moving forward.

NZD/USD  Technical  Analysis

Kiwi/dollar  advanced very nicely, rising above resistance and the round level of 0.70  mentioned last week. It topped at 0.7050 before turning all the way down.

Technical lines, from top to bottom:

0.7160 worked as  support when the kiwi was trading on much higher ground in 2014.  0.7050 was the high in  April 2015.

The round level of 0.70 is still important because of its roundness but it isn’t really strong.  The low of 0.6940 allowed for a temporary bounce.

The round 0.69 level has  switched positions to resistance.  0.6860 was a low point as the pair dropped in June 2015. 0.6820 is worth noting after it capped the pair  in March 2016.

It is followed by  0.6780 that capped the pair in recent months.  The  round level of 0.67 that works nicely as support.  Another line worth noting is 0.6640, which capped the pair in November.

The post crisis low of 0.6560 is still of importance.  Below, the round 0.65 level is of high importance now, serving as support.

I remain  bearish  on  NZD/USD

The sky high levels in which the kiwi is trading are a headache for the central bank. Even without another rate cut, we could see jawboning to push the pair lower, extending the downturn that we have already seen beginning.

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