The New Zealand dollar was moving nicely higher across the board, but a last minute dollar storm eventually kept erased a lot of the gains. What’s next form here? The all-important inflation release is the key event. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The NZIER Business Confidence jumped from 38 to 52 points in Q4, reflecting ever stronger confidence. This release supplied some back wind to the NZD. However, stronger figures from the US towards the end of the week pushed the greenback higher, and the kiwi couldn’t stand its ground. The trend remains higher, as the chart shows.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- CPI: Monday, 21:45. New Zealand’s Consumer Price Index is released only once per quarter, making the release more important for the markets. As the RBNZ talked about hiking the rates during 2014, the level of inflation published now could be key to the timing of the move. After a rise of 0.9% in Q3, a similar rise of 0.8% is predicted now.
- Business NZ Manufacturing Index: This purchasing managers’ index rose in November to 56.7 points, and has remained in growth territory, above 50 points, for a very long time. Another small gain is expected now.
NZD/USD Technical Analysis
NZD/$ started the week with a climb up the stairs, but met resistance at the 0.8435 line mentioned last week. It then gradually dropped, finding initial support at 0.8335, before losing some more ground.
Technical lines, from top to bottom:
0.8544 was the peak the pair rose to back in October and it serves as a strong line in the distance. 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. The pair fell short of this line in January 2014.
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, 0.8135 provided support for the pair in January 2014. Below 0.80, we find another round number: 0.79. This level was a pivotal line several times in the past.
Uptrend
As the chart shows, the pair is riding on an uptrend support line since the beginning of the year. The recent drop found support just on this line.
I remain bullish on NZD/USD
After the New Zealand dollar showed resilience in the face of a strengthening US dollar, a calmer week before the FOMC decision, together with solid inflation numbers, can allow NZD/USD to enjoy some gains.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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