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The  New Zealand dollar  finally staged a recovery. Can it continue or is it just a temporary correction? The events that are set to move the kiwi are inflation expectations and trade balance.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Milk prices finally rebounded and the kiwi followed. The leap of 14.8%, which was fueled by the Russian change in sanctions among other factors, allowed the kiwi to breath. In addition, the FOMC meeting minutes in the US showed reluctance to raise rates and that hurt the greenback.

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

NZDUSD technical analysis August 24 28 2015 New Zealand dollar fundamental outlook

  1. Inflation Expectations: Tuesday, 3:00.  With CPI released only once per quarter, this complementary number from the RBNZ helps understand the inflation situation. In the past two quarters, expectations  stood on just under 2%. After 1.9% in Q1, a slide is on the cards.
  2. Trade Balance: Tuesday, 22:45. After 5 months of surpluses, New Zealand’s balance of trade slipped back down into deficit territory, to -60 million. A deeper deficit could be seen now: 600 million.

NZD/USD  Technical  Analysis

Kiwi/dollar started the week hugging the 0.6560 level (mentioned last week). It then changed gears and moved higher, challenging the 0.67 line.

Live chart of NZD/USD:

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Technical lines, from top to bottom:

0.7075 provided some support in May and is a weak level now.  And of course, the very round level of 0.70 looms large and gave a fight before the pair continued south in June.

Further,  the low of 0.6940 allowed for a temporary bounce.  The round 0.69 level is  switched positions to resistance.

0.6860 was a low point as the pair dropped in June 2015. It is followed by the 0.68 level that worked as resistance when the pair was climbing a few years back.

Close by, the July high of 0.6770 serves as resistance. Quite close by, the high of 0.6740 seen in July is another cap.

It is followed by the round level of 0.67 that is a pivotal line in the range.  The now previous July  low of 0.6650 was a multi-year low and the break below it was not confirmed.

0.6620 is the new 2015 low and for now serves as minor support.  The post crisis low of 0.6560 is still of high importance.

Below, the round 0.65 level is of high importance now. The last line is  0.64886, which was the low both in July and in August – a double bottom.

There isn’t much on the way down. 0.6160 can be noted as a post crisis attempt to recover.

I am bullish  on  NZD/USD

The big kiwi sell off may be over for now, at least until the RBNZ strikes again. New Zealand’s most important export, milk (with all the related products) fell too far and could enjoy a bounce that could last. Contrary to commodities such as  oil, copper and iron, demand for food is stronger. Assuming we don’t get a big greenback comeback, more gains could be seen on NZD/USD.

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