The New Zealand dollar continued struggling, this time more because of the strength of the US dollar than local issues. The focus now shifts back to New Zealand with employment data. Can it recover now? Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The kiwi suffered from a fall in prices of milk – a key export for the small nation. Building consents recovered in New Zealand with a rise of 3.5%. In the US, the excellent GDP report, showing 4% annualized growth in Q2, trumped everything else, including a not-too-hawkish Fed.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- ANZ Commodity Prices: Monday, 1:00. As an exporter of commodities, prices make a difference, as we’ve seen with Fonterra’s lower forecasts for milk, that have sent the kiwi down. After a drop of 0.9% in June, a small gain is expected now.
- Employment data: Tuesday, 22:45. New Zealand published employment data only once per quarter, making every publication very important. In Q1, the country enjoyed a rise of 0.9% in employment, and the unemployment rate remained unchanged at 6%, worse than 5.8% expected. That was disappointing. This time, a small gain in the employment change is expected, with the unemployment rate not expected to change. Another figure to watch is the labor cost index, which advanced by only 0.3% in Q1 and isn’t expected to move much faster in Q2.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar began the week with an attempt to recapture the 0.8550 line (mentioned last week). When this failed, the pair tumbled down and bottomed out just above 0.8460 before bouncing a bit higher.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
The May peak of 0.8780 is a very important line: the kiwi hesitated towards this line in June. The previous 2014 peak of 0.8745 is now weaker resistance after being broken.
The round number of 0.87 proved its strength during May and is now a pivotal line. The older swing high of 0.8640 worked as a pivotal line but eventually capped the pair.
It is followed by the round number of 0.86, which worked as a cushion during May 2014. The 0.8560 level capped the pair in July 2014 and prevented a recovery.
0.8520 capped the pair several times in July 2014 and serves as resistance. 0.8460 is the next line of support under the round number. It served as a cushion during the same period of time.
Below, 0.8435 worked in both directions in 2013 and is somewhat weaker now. 0.84 is minor support.
It is followed by 0.8335. The last line for now is 0.8250, which provided some support back in February.
Long term uptrend line broken
The trend line mentioned in recent weekly reports has been broken to the downside. It is a bearish sign or will the pair chase this line?
I am bullish on NZD/USD
After three consecutive weeks of falls, the pair might be ready to recover. While we cannot expect to see flying colors in the kiwi jobs report, a stabilization after the previous disappointment could set the stage for some improvement, especially as the dust settled over the top tier and excellent US data.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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