The New Zealand dollar had a roller coaster week, suffering the might of the US dollar, but recovering thanks to its own strong fundamentals. Where is it headed next? GDP is the key event. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The US dollar stormed the board, and sent NZD/USD below 0.72. However, upbeat words from the RBNZ sent the kiwi higher. The New Zealand economy is doing well. While the central bank remained neutral, they seemingly stopped complaining about the strength of NZD, and this also served as a signal to rise.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- GDT Price Index: Tuesday, Dairy products are New Zealand’s key export. As the price of milk moves up, so does the kiwi. In the past 6 bi-weekly reports, the prices went up. After a leap of 10.1% in mid February, a more moderate rise was seen in early March: 1.1%. Will we see a slide now?
- Current Account: Tuesday, 21:45. New Zealand saw a wide deficit of over 5 billion in Q3, but deficits are not all always the name of the game in the country’s accounts. We could see a smaller deficit or even a small surplus for Q4.
- GDP: Wednesday, 21:45. New Zealand’s economy enjoyed a strong growth rate of 1% in Q3, above expectations and showing a sign of strength. A slightly slower growth rate could be expected now for Q4, but we should still get a decent y/y rate.
- Visitor Arrivals: Thursday, 21:45. Another important sector in the economy is tourism. After a slide in December, January saw another rise of 0.8% in visitors arriving in the country. Another rise could be seen for February, which is in the middle of the summer.
- Credit Card Spending: Friday, 2:00. With retail sales being published only once per quarter, this measure of spending gives an indication to the state of the consumer. A strong y/y jump of 6.2% was seen in January. a slightly slower growth rate is on the cards now.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar began the week with a gradual slide that deteriorated, but the pair found support just above the 0.7180 line (mentioned last week). It then enjoyed a sharp turnaround and met resistance just under 0.7450.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
0.7715 was stronger support after serving holding the pair in December. 0.7680 worked as support in December and that is where the pair stopped in early January 2015.
Below this point, we are back to levels last seen in 2012: 0.7615 now works as resistance after providing support during January 2015. It is followed closely by 0.7585 which capped the pair on an initial recovery attempt.
The very round number of 0.75 capped the pair just before the big fall and serves as strong resistance. It is followed by 0.7450 that had a role in the past.
The next line is 0.7370, which was a low point in 2011. It is followed by 0.7325, which capped the pair in the middle of 2010.
The recent 2015 low of 0.7235 is now the next support line. It is followed by 0.7180 that served as resistance back in 2010.
The swing low of 0.71 in 2011 provides further support before the very round number of 0.70.
Below this round number, we have 0.6950 and 0.6810.
I am neutral on NZD/USD
The New Zealand economy is doing well, and the RBNZ certainly acknowledged it. Wheeler might even still be worried about house prices in Auckland. We will probably get more reminders from GDP and from milk prices. However, also in the US things are looking good, and an expected removal of “patience” by the Fed could strengthen the dollar.
In our latest podcast, we discuss QE: Who got it right, Krugman or the Gold bugs?
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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