NZD/USD Forecast Jan. 25-29

The  New Zealand dollar  was pushed down on bad news from home as well as the global stock meltdown but with the improvement in the mood, so did the fate of the kiwi improve. It now face the decision from the RBNZ.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Consumer prices dropped by 0.5% in Q4 2015, worse than had been expected and potentially opening the door for a rate cut. The GDT Price Price Index, or the price of milk, dropped once again, this time by 1.4%, adding downside pressure on the kiwi. In the US, data was OK, but worries about China, falling commodity prices and falling stocks all sent money away from risk currencies such as the kiwi.

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

1. Credit Card Spending: Tuesday, 2:00. With retail sales released only once per quarter and the popularity of credit cards, this monthly report provides a good snapshot of  consumer spending and the economy. After a rise of 8.5% y/y, a smaller advance is on the cards now.
2. Rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand cut the rates to the post-crisis low of 2.5% last time, but provided a “hawkish cut”,  hinting that no rate cuts are on the horizon and did not complain too much about the value of the NZ$. Things have deteriorated since then: milk prices, inflation, China, and you name it. However, the fall of the kiwi and the  credibility of the central bank could push Wheeler and co. to keep their powder dry, at least for now.
3. Trade Balance: Wednesday, 21:45. The trade deficit squeezed last time to 779 million, down from over 1 billion beforehand. We’ll now get the last report for 2015, and it  could be lower, -130 million.
4. Building Consents: Thursday, 21:45. This figure provides a view of the housing sector, despite its volatility. A rise of 1.8% was recorded in November. A slide could be seen for December.

NZD/USD  Technical  Analysis

Kiwi/dollar started was depressed throughout the week,

Technical lines, from top to bottom:

We begin from lower ground this time. The low of 0.6940 allowed for a temporary bounce.  The round 0.69 level has  switched positions to resistance.

0.6860 was a low point as the pair dropped in June 2015. It is followed by  0.6790 that capped the pair in recent months.

It is followed by the round level of 0.67 that works nicely as support.  Another line worth noting is 0.6640, which capped the pair in November.

The post crisis low of 0.6560 is still of importance.  Below, the round 0.65 level is of high importance now, serving as support.

Below, we find 0.6425, whcih was the low point in November, as support. 0.6350 provided support in January 2016.

The last line for now is 0.63, which had a role in the past.

I am bullish  on  NZD/USD

While the fall in inflation could justify a rate cut, the fall of the kiwi could keep the RBNZ abay,  allowing some recovery. In addition, the Federal Reserve could  signal some worries about financial markets, allowing risk taking after the risk averse movements.

In our latest podcast we  update from the currency war front

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