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The  New Zealand dollar  could not continue the momentum of the previous week. Trade balance and the ANZ Business Confidence figures are the biggest market movers now. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

New Zealand retail sales disappointed by rising only 1.2% in Q4, contrary to expectations fo +1.7%. Core sales rose only 0.7%. While the figures are not expected to prevent a rate hike, they certainly weighed on the kiwi.

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

NZD USD February 24 28 2014 technical forex chart for currency trading kiwi dollar analysis

  1. Credit Card Spending: Monday, 2:00. As retail sales are published only on a quarterly basis, this indicator provides critical, up to date information about the consumer. After a y/y rise of 4.7% seen last month, another such rise is expected now.
  2. Inflation expectations: Tuesday, 2:00. Similar to the previous figure, official CPI is published only once a quarter, hence expectations data also plays a role in shaping rate expectations. After a 2.3% rise seen in Q3, a slightly weaker figure is predicted now.
  3. Trade Balance: Wednesday, 21:45. New Zealand enjoyed a second consecutive month of a trade surplus in December, with 523 million. Another positive month is expected in January, and this could certainly be positive for NZD.
  4. Visitor Arrivals: Wednesday, 21:45. As tourism plays an important role in the economy, the number of visitors usually has an impact on the New Zealand dollar. This time, the trade balance release somewhat overshadows it. After a rise of 0.2% in December, a bigger increase is predicted now.
  5. Building Consents: Thursday, 21:45. The housing sector is strong in New Zealand, leading the recovery and some fear it may have entered bubble territory. After 5 straight months of increases, the number of building permits is likely to continue, albeit at a more moderate pace than 7.6% seen in December or 12.5% in November.
  6. ANZ Business Confidence: Friday, 00:00. This survey of 1500 businesses has been on the rise within positive ground, rising to 64.1 points, reflecting strong optimism among businesses for the next 12 months. A small drop could be seen for the month of February. Note that the previous release was for December.

NZD/USD  Technical  Analysis

Kiwi/dollar started the week with a move higher and peaked at 0.9392, a line which now replaces the 0.84 line (mentioned last week). It then changed direction and fell all the way to 0.8280 before returning to battle the 0.8335 line.

Technical lines, from top to bottom:

The October peak of 0.8544 is the highest level in the background. 0.8435 was the peak in September and was retested in January. It is a strong double top.

0.8392 served as resistance was a recurring peak between November and February.  0.8335  capped a move higher in December and also had a role in the past. The pair fell short of this line in January 2014.

Below,  0.8280  supported the pair in February 2014 and also in the past.  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. Lower, 0.8135 provided support for the pair in January 2014.

0.8060 provided support to the pair in January 2014 and is the level to watch. The round number of 0.80 doesn’t have a technical significance, but is certainly psychologically important.

Below 0.80, we find another round number: 0.79. This level was a pivotal line several times in the past. The last line for now is 0.7850, that worked as cushion back in September, before the big rally.

I am neutral on NZD/USD

After the excellent job figures ignited an nice rally, some of the steam of that kiwi rally is gone. The general direction remains higher, especially as a rate hike is coming. Nevertheless, we might see overall stability this week, even if the barrage of figures will certainly supply volatility.

Further reading: