The New Zealand dollar traded in range but eventually broke higher. And now, it is money time for the kiwi, with the central bank ready to raise the interest. Is the move already priced in or will we see a rally? Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
New Zealand’s overseas trade index rose by 2.3%, higher than 1.9% expected and continuing the positive trend seen beforehand. Some weakness in US data was all that was needed to send NZD/USD above 0.85, but the US also taketh away with the better than expected Non-Farm Payrolls. The focus is now on New Zealand.Updates:
NZD/USD daily graph with support and resistance lines on it. Click to enlarge:
- Manufacturing Sales: Sunday, 21:45. This quarterly indicator has shown a strong 4.7% rise in Q3, and is now expected to continue rising, albeit at a slower rate. Sales at the manufacturing level reflect potential future consumption.
- Rate decision: Wednesday, 20:00. The time is ripe for a rate hike in New Zealand: from 2.50% to 2.75%. The central bank already provided plenty of hints: both towards 2014 and also in the previous rate decision. Also the government began preparing the public for rate hikes. Recent economic data, and especially the impressing employment numbers (which showed a drop in unemployment despite a rise in the participation rate) all point to a heating up of the economy. The only worry of the RBNZ is that this will push the value of the kiwi up, but it seems that at current levels, the economy can absorb a higher rate. The hike is not fully priced in, and could trigger a small rise in NZD/USD despite the long preparation.
- FPI: Wednesday, 21:45. As an exporter of food, the Food Price Index has an impact on the currency. After a rise of 1.2% last month, a similar rise is likely now. The indicator is released shortly after the rate decision, and might be overshadowed by it.
- Business NZ Manufacturing Index: Thursday, 21:30. This purchasing managers’ index like figure has been on positive ground (above 50 points) for over a year, stalling between 56 to 57 in the past few months. Another figure similar to 56.2 points seen in January is expected for February.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar started the week with a gap lower, but quickly managed to close it, showing a lot of resilience, despite being capped under the 0.84 level (mentioned last week).
Technical lines, from top to bottom:
The 2013 peak of 0.8676 is a strong line in the distance. It is followed by the stubborn May 2013 high of 0.8586 is another important line.
The October peak of 0.8544 is an important resistance line. 0.85 is around number and could trigger comments by policymakers. A move above this line didn’t hold in early March 2014.
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.
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.
I remain bullish on NZD/USD
Those excellent job figures for Q4 leave little room for doubt about the imminent rate hike, which is probably the first out of many. Other figures are also kiwi supportive. While it will come as no surprise, the actual move is likely to be NZD positive rather than a “buy the rumor, sell the fact” reaction. In addition, the intent to perform more hikes in upcoming months is likely to keep the pair bid for some time.
- 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.