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The  New Zealand dollar  had a negative week, falling below 0.78 together with the milk. The big event of the upcoming week is undoubtedly the rate decision by the RBNZ.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

The most recent milk auction saw another drop in prices: another 1.1% drop after 3.1% last time. Also the wider ANZ Commodity Prices and terms of trade also dropped. All this certainly contributed to the nosedive. Yet it wasn’t only a kiwi story but also a story of a strengthening US dollar once again, and NZD/USD wasn’t different. Data from the US was mostly  optimistic and positive, especially with the superb NFP. Let’s start:

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

NZD USD December 8 12 technical analysis New Zealand dollar fundamental outlook and sentiment for currency trading

  1. Manufacturing Sales: Sunday, 21:45. Just before markets wake up, we get to see another side of the economy: manufacturing, which is often overshadowed by milk and tourism. After a drop of 1.9% in Q2 and it could now stabilize.
  2. Rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand last raised the interest rate in July but signaled a long pause in the tightening cycle. With the fall in inflation and despite an improving labor market, there are doubts if Wheeler and co. could  continue tightening in 2015 or rather cut the rates. While no change is expected now, the statement could go either way. The more  certain thing is that they will complain about the value of the kiwi, despite the recent settling under 0.80.
  3. FPI: Wednesday, 21:45. The Food Price Index remained flat last month, and is likely to slide now, alongside the drop in other  commodity prices. The price of food is important for New Zealand, even though it has recently been overshadowed by those milk auctions.
  4. Business NZ Manufacturing Index: Thursday, 21:30. This survey of manufacturers is similar to PMIs.  Since  late 2012, manufacturing has been growing according to Business NZ, with the score sitting above 50. In October,  an especially strong figure of 59.3 was printed. A small dip cannot be ruled out now.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar began the week with a dip below 0.78, but that was followed by a quick ascent above 0.79. The pair later suffered a downfall, battling over 0.7765 (mentioned last week) and eventually losing ground.

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 now on the way up.

0.7715 is stronger support after serving holding the pair in December.  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.

Wide  downtrend channel maintained

As the thick black lines show, the pair is trading within a wide channel that is heading down.

I am bearish  on  NZD/USD

While the New Zealand economy still looks good, the RBNZ will likely not miss a chance to hit the NZD when it’s down, as we’ve seen in the past. So, we could see a dive this week, but a bounce later on.

In our latest podcast, we preview December’s big events, talk  about the importance of jobless claims, the crash in oil prices and GOFO going negative:

Download it directly here.

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Further reading: