The New Zealand dollar fell sharply in a week that probably had the RBNZ smiling, but then managed to enjoy some kind of recovery. What’s next?The milk auction is the main event in a busy week . Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
Speculation about two rate cuts coming to New Zealand now in place, with the first one coming already in June according to some market participants. NZD/USD suffered badly, even with the USD on the back foot due to estimations that the Fed rate hike is beyond the horizon. However, the excellent retail sales report from New Zealand certainly supported a recovery of the kiwi.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- PPI: Monday, 22:45. Producer prices are also released only once per quarter, and despite their lesser importance in comparison to CPI, they still carry weight. In Q4 2014, PPI Input dropped by 0.4% and could rise in Q1 2015. PPI Output slid by 0.1%.
- Inflation Expectations: Tuesday, 3:00. This quarterly survey provides a view on the future directions of inflation via a survey of consumers and complements the official CPI release. The survey, complied by the RBNZ, could give us an indication about the next move of the Bank – to cut or not to cut. In Q4 2014, inflation expectations dropped below 2% to 1.8%. Another slide now could exacerbate market expectations for a cut in June.
- GDT Price Index: Tuesday. The Global Dairy Trade, aka as the price of milk has a significant impact on the kiwi as dairy products are New Zealand’s main exports. The indicator, released every other week, dropped in the past 4 auctions and weighed on the kiwi. After a slide of 3.5%, a rise is still awaited.
- Visitor Arrivals: Wednesday, 22:45. Tourism is also a significant sector in the economy and this monthly indicator provides some insights. After a drop of 3.6% in March, the first month of autumn, we can expect stability in April.
- Annual Budget Release: Thursday, 2:00. The government releases its budget plans, and perhaps more importantly, it consists of updated growth and inflation forecasts. Lower growth forecasts could weigh on the kiwi, while some optimism could help stabilize it.
- Credit Card Spending: Thursday, 3:00. With retail sales published only once per quarter and the wide usage of credit cards, this measure provides an updated snapshot of the kiwi consumer. After a year over year rise of 5.2% in March, a slower gain is on the cards now.
NZD/USD Technical Analysis
Kiwi/dollar began the new week with an attempt to rise but hit resistance at 0.7485 (mentioned last week). It then turned south, losing 0.7450 and hitting a new low of 0.7313. A late bounce sent it to 0.7560 but yet again, the pair dropped. A very volatile week indeed.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
The very round level of 0.80 looms above, but is closely followed by 0.7975, which played a role in the past. 0.7850 is the next important level after caping the pair in December.
The round level of 0.78 played a role in the past and is high resistance. 0.7740, which was the peak in April 2015 is now important resistance.
The round level of 0.77 proved its strength in March 2015 and capped the kiwi’s ascent. Below, 0.7665 is lower resistance, after having this role in December.
0.7615 now works as resistance after providing support during January 2015. 0.7560 capped the pair in May and serves as important resistance.
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 0.7315, which supported the pair in May.
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.
I remain bearish on NZD/USD
The RBNZ wants a lower kiwi, and rate cut expectations have risen. The strong retail sales numbers in New Zealand trump the US ones but do not change the direction of central banks, which remain in opposite ways.
In our latest podcast, we ask: USD: Glass half full or half empty? And also discuss other topics:
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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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