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The  New Zealand dollar  reached for the sky but met the RBNZ there, and couldn’t maintain the gains. It now faces a bigger test from the Bank: the rate decision. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Inflation in New Zealand is lower than expected: a drop of 0.3% in quarterly prices in Q1 2015. This was due to oil prices but slightly worse than predicted. Yet the bigger blow came from the central bank: the regular complaint about the exchange rate was accompanied by a statement saying the rates will not rise anytime soon. This hurt the kiwi. In the US, data is beginning to look better with existing home sales on the rise  but other data was weak and the dollar struggled.

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

NZDUSD April 27 May 1 technical analysis New Zealand dollar fundamental outlook sentiment and trading

  1. Trade Balance:  Tuesday, 22:45.  New Zealand enjoyed a surplus of 50 million in February, the second consecutive surplus after many months of deficits, but this plus sign came out weaker than 375 million predicted. A  wider surplus is on the cards now: 300 million.
  2. ANZ Business Confidence: Wednesday, 1:00. This survey of 1500 businesses rose to 35.8 points in March, but has been stable in the past few months after falling from sky high levels. A similar number is expected now, and this means optimism among New Zealand’s business community.
  3. Rate decision: Wednesday, 21:00. The Bank of New Zealand has a neutral bias towards, but recent comments from Dr. Dermott gave some market spectators the sense that a rate cut is on the cards. We might  get some answers to that in the rate decision which is expected to leave the rate unchanged at 3.50%. What’s more certain, is that the RBNZ doesn’t like the strength of the kiwi and will complain about it.
  4. Building Consents:  Wednesday, 22:45. The number of approvals is quite volatile in Aotearoa. Three consecutive drops were recorded with the decline of 6.3% being the sharpest fall. A bounce back is expected now.

NZD/USD  Technical  Analysis

Kiwi/dollar  began the week trading in the high ranges, but eventually dropped, finding support at 0.7550 (mentioned last week).

Live chart of NZD/USD:

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Technical lines, from top to bottom:

The very round level of 0.80 looms above, but is closely followed by 0.7975, which played a role in the past. 0.7850  is the next important level after caping the pair in December.

The round level of 0.78 played a role in the past and is high resistance. 0.7740, which was the peak in April 2015 is now important resistance.

The round level of 0.77 proved its strength in March 2015 and capped the kiwi’s ascent. Below, 0.7665 is lower resistance, after having this role in December.

0.7615 now works as resistance after providing support during January 2015. It is followed closely by 0.7585 which capped the pair on an initial recovery attempt. Another line to watch out for is 0.7550, which separated ranges in March 2015.

The very round  number of 0.75 capped the pair just before the big fall and serves as strong resistance. It is followed by 0.7450 that had a role in the past.

The next line is 0.7370, which was a low point in 2011. It is followed by 0.7325, which capped the pair in the middle of 2010.

The recent 2015 low of 0.7235 is  now the next  support line. It is followed by 0.7180 that served as resistance back in 2010.

I turn bearish  on  NZD/USD

The RBNZ knows how to hit the kiwi when its down. A combination of USD strength and a strong impact from previous RBNZ comments could  provide Wheeler and co. the necessary appetite to strike the kiwi down. In general, the New Zealand economy is doing well, but the Bank doesn’t want to see it endangered with an exchange rate that is unfavorable.

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Further reading: