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The  New Zealand dollar  suffered another week of losses and eventually found support at 0.84. The highlight of the the upcoming week is clearly the rate decision. Where will the RBNZ send the kiwi this time?. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Worries about milk prices weighed on the kiwi as trade conditions become less favorable. On the other hand, it seems that market expectations towards the rate decision are too low at the moment, and that the RBNZ could be more hawkish that anticipated. In the US, the economy continues its steady growth and for NZD/USD, the  scene belongs to the kiwi at the moment.

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

NZD to USD Technical Analysis June 9 13 2014 fundamental outlook and sentiment

  1. Manufacturing Sales: Monday, 22:45. While this figure comes a long a time after the quarter ends, it still provides an interesting insight on the manufacturing side of the economy. New Zealand enjoyed two strong quarters of growth: 6.2% and 6.3%. A slower growth rate is expected for Q1 2014.
  2. Rate decision: Wednesday, 21:00.  After two well prepared rate hikes, the Reserve Bank of New Zealand is likely to pause this time.  A cooling of the housing sector and falling milk prices could trigger a pause in the hiking cycle. The RBNZ would also like to see a lower value for NZD/USD. Nevertheless, the cycle is far from over:  Graeme Wheeler and co. are likely to show continued commitment to curb inflation and are likely to telegraph more hikes. Special attention to the statement is warranted. In the first rate hike, the surprise was not the hike but rather the strong wording of the statement and the hawkish message in the press conference.
  3. Business NZ Manufacturing Index: Thursday, 22:30. After the ANZ index disappointed with a big drop in confidence (albeit from high levels), we can expected this survey of manufacturers to follow suit and edge down from 55.2 points seen in April to a figure closer to the tipping point of 50 in May.
  4. FPI: Thursday, 22:45. As an exporter of food, the Food Price Index is of importance to New Zealand. However, the recent announcements about milk prices took some of the sting out of this report.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar  began the trading week with a slide alongside the downtrend resistance line described last week,  and found a bottom at the round 0.84 level. It then recovered, reconquered the line, but was unable to  close above it.

Technical lines, from top to bottom:

The previous  2014 peak of 0.8745 will be watched on any upside move.  The round number of  0.87  proved its strength during May and joins the chart as key upside resistance.

The older swing high  of  0.8640 worked as a pivotal line but eventually capped the pair. It is followed by  the round number of  0.86, which  worked as a cushion during May 2014.

The low of  0.8550  served as yet another pivotal line in the range. 0.85 is  an important and very round number that looks like a clear separator of ranges.

0.8435  was the peak in September and was retested in January. It was  a strong double top. 0.84, a round number, provided clear support in June.

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.

Downtrend resistance

As the thick black line on the chart shows,  downtrend resistance since reaching a peak in early May. The line  was only  temporarily breached.

I turn from bearish to bullish  NZD/USD

The  RBNZ wants a weaker kiwi  but will probably reiterate that it intends to hike the rates, despite the recent souring of economic data. In the US, the economy continues growing nicely,  but this is less supportive for the greenback against the NZD.

Further reading: