The New Zealand dollar had a positive week, despite some worrying signs on the domestic front. We now get the word from the RBNZ. Will they remain dovish? Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
The New Zealand economy grew by only 0.4% q/q in Q4 2016. This was short of 0.7% predicted and the report included a downgrade for Q3 to 0.8%. The report stalled the rally in NZD/USD that was driven by the Fed’s dovish hike (see the 5 dollar downers) and the pair struggled to hold onto 0.70.Updates:
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NZD/USD daily graph with support and resistance lines on it. Click to enlarge:
- Westpac Consumer Sentiment: Sunday, 21:00. Very early in the trading week, we get the state of the consumer from Westpac, a bank. The 1500-strong survey showed a rise in December, to 113.1 points. We now get the data for Q1 2017.
- Visitor Arrivals: Monday, 21:45. Tourism plays an important role in the economy of New Zealand. A rise of 1.9% was seen in January. February, in the middle of the summer, should see a similar advance.
- Credit Card Spending: Tuesday, 2:00. With official retail sales data published only once per quarter, the data regarding the usage of plastic cards provides up to date data. An annual rise of 7.1% was recorded back in January.
- GDT Price Index: Tuesday, during the European afternoon. The Global Dairy Trade has a significant influence on the kiwi, as it reflects the price of milk, the nation’s key export. The GDT figure saw two consecutive falls, with the recent 6.3% plunge hurting the currency. Will it bounce now?
- Rate decision: Wednesday, 20:00 .The Reserve Bank of New Zealand left the interest rate unchanged at 1.75% in the previous meeting and made dovish sounds, not really acknowledging the robustness of the NZ economy. The team led by Governor Graeme Wheeler is projected to leave the Official Cash Rate unchanged once again. The tone of the statement could remain worrisome given the weak GDP report.
- Trade balance: Thursday, 21:45. New Zealand saw a trade balance deficit of 285 million back in January. A similar deficit is likely for February.
NZD/USD Technical Analysis
Kiwi/dollar traded under the 0.6960 level (mentioned last week) during the first part of the week, but then made a breakout only to meet resistance at 0.7035.
Technical lines, from top to bottom:
0.7380 was the high recorded back in February and is our top line for now. Below, we find 0.7250, which capped the pair back twice in mid-February and serves as a double top.
0.7160, which capped the pair back in November is a pivotal line within the range. 0.7125 worked as a double bottom before it collapsed in early March.
0.7050 served as resistance during the month of March. The very round number of 0.70 is a battle zone. Further below, 0.6960 worked as support in November and then in January once again.
Further below, 0.6960 worked as support in November and then in January once again. The round number of 0.69 is weak support and it is followed by 0.6865.
I turn from bullish to bearish on NZD/USD
After a run on the Fed’s weak hand, the kiwi could now turn south, especially given the weak GDP and the consequent expected dovishness from the RBNZ.
Our latest podcast is titled Fed fever and crashing crude in the Ides of March
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