The New Zealand dollar lost ground for a second week in a row, falling to long term uptrend support. In the first week of the holidays, can it stabilize? Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The announcement about QE tapering in the US gave a boost to the US dollar, and no currency was spared. The big decision overshadowed positive data from New Zealand: the economy grew by 1.4% in Q3, beating predictions of 1.1%. The trade balance figure, which was released ahead of time, showed a surplus. It is the first such surplus for the month of November in 22 years. Trade with China now tops trade with Australia. Credit card spending also showed strong consumer sentiment, with a rise of 6.9%. Can the strong New Zealand economy be reflected in a stronger NZD/USD and just in a drop of AUD/NZD?Updates:
NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
No events are scheduled this week in New Zealand.
NZD/USD Technical Analysis
NZD/$ began the week with a challenge of 0.8290, a line which proved later capped the pair again and again. It then suffered a downfall, and bottomed out at 0.8150 (mentioned last week). It then stabilized a bit higher.
Technical lines, from top to bottom:
0.8435 was the peak in September – a peak that triggered a big downfall. After it was broken again, the line switched to support. It is a clear separator. The round number of 0.84 is another line of resistance after capping the pair in September and in November.
0.8335 capped a move higher in December and also had a role in the past. Below, 0.8290 capped the pair several times during December and now works as a key line to the upside.
0.82, worked as support several times: in September, October and also in December. It is somewhat weaker now. Close by, 0.8150 capped the pair in August and worked as support in March.
The round number of 0.81 worked as resistance in July. Lower, 0.8050 was a peak back in June and works as support before the very round number of 0.80.
Below 0.80, we find another round number: 0.79. This level was a pivotal line several times in the past. 0.7840 worked as resistance when the pair traded in lower ground earlier in the year.
One uptrend support broken, another to go
As shown by the thick black lines on the chart, NZD/USD broke below the short term uptrend support line that began in late November. However, it bounced from the longer term support line that began in late August and was formed in late November.
I am neutral on NZD/USD
The reaction to QE tapering was relatively resilient, as expected. Despite the fall, we can expect a stabilization now, and even a resumption of the uptrend. The economy is doing well and the central bank is set to raise the rates. So, tapering could have been a temporary glitch.
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