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The  New Zealand dollar  traded in range.The first week of the last month of the year features several events, with the milk auction standing out.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

New Zealand’s trade balance deficit came out worse than expected with 908 million. On the other hand, business confidence as measured by ANZ continues recovering after the recent decline and as a forward looking indicator, it may have the upper hand. In the US, data hasn’t been all good, despite an upwards revision to GDP. What’s next for the kiwi? Let’s start:

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

NZDUSD December 2014 technical analysis New Zealand dollar USD fundamental outlook and sentiment

  1. RBNZ Governor  Graeme Wheeler talks: Sunday, 19:45. Just before the market opens, Wheeler speaks in Wellington. The governor hasn’t missed too many opportunities to talk down the kiwi. Will he do this once again? Conditions are not that favorable this time, so he might wait for a better opportunity.
  2. Overseas Trade Index: Sunday, 21:45. This  important quarterly indicator, known also as Terms of Trade has advanced 0.3% in Q2, beating expectations for a slide and rising for a sixth consecutive quarter. A small decline is likely for Q3. A drop of 4.3% is expected now.
  3. ANZ Commodity Prices: Tuesday, 00:00. This measure of commodity prices is important for New Zealand’s commodity  oriented economy. Despite its early publication just after the month ends, it is somewhat overshadowed by the milk auction. Commodity prices as measured by ANZ have fallen for 8 consecutive months, dipping 1.3% in October. Another slide is likely for November.
  4. GDT Price Index: Wednesday. This bi-weekly figure, officially called the  Global Dairy Trade and more known as the milk auction, is critical for New Zealand’s key sector. The last two auction showed a decline in prices, with the a clear impact coming from the 3.1% drop seen on November 18th. A more stable number is likely now.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar started the week with a gentle slide towards the 0.7850 line (mentioned last week). It then continued flirting in range.

Live chart of NZD/USD:

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Technical lines, from top to bottom:

0.8312 was the low point in August 2014 and it also follows the downtrend support line. The next line  is 0.8270, which was the low point in September.

Further below, the round levels of 0.82 is certainly worth watching. It is followed by the  initial September low of 0.8120.

0.8075 was one of the cycle  lows and now works as resistance.  Even lower, 0.8050 provided support for the pair back in February and is the last line before the very round figure of 0.80.

0.80 is now key resistance on the upside. Just below, the old  resistance line of 0.7975 is coming back to play after capping the pair in October.

0.7930 was a double top in October’s recovery and is important to watch. It is followed by 0.7850.

0.78 is a round number and provided support various times, including recently. Going deeper, 0.7765 worked as support, and is a line to watch on the way down.

0.7715 is stronger support after serving as a cushion for the pair in September 2013.  0.7660 is the new low in November 2014, making it key support.

Below this point, we are back to levels last seen in 2012: 0.7615 is initial support and the critical line is 0.7460.

I am neutral  on  NZD/USD

While US data hasn’t been extraordinary, the kiwi probably needs a stronger boost from inside New Zealand to move higher. Milk prices could keep the kiwi shy of the 0.80 line for another week.

In our latest podcast, we talk about holiday trading, run  through the US situation, talk about the elections and the BOE and analyze China’s rate cut:

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Further reading: