The New Zealand dollar surrendered to the strength of the US dollar and dropped sharply. It is now trading in a downtrend channel. Will this trend continue? Trade balance and business confidence are the main events. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
Producer prices rose stronger than expected in Q1, with PPI Input rising 1%. Also inflation expectations moved higher. Nevertheless, the kiwi surrendered to the move higher of the US dollar. While the FOMC minutes did not consist of big surprises, it seems clear that the central bank already looks towards the days after QE.
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- Trade Balance: Sunday, 22:45. New Zealand has enjoyed trade surpluses in the past few months, with figures usually exceeding expectations. After +920 million in March, a smaller surplus of around 630 million is predicted.
- ANZ Business Confidence: Wednesday, 1:00. This survey of around 1500 business reached a multi-decade high of 70.8 points in February, but has fallen since then. From 64.8 seen in April, a moderate drop is likely now in this influential figure.
- Building Consents: Thursday, 22:45. While month over month changes are huge, this volatile indicator has a strong impact on the kiwi. After a leap of 8.3% in March, a small drop is due for April.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar began the week with a drop under the round 0.86 line mentioned last week. This proved to be a decisive break as the pair could not recapture the line. It continued lower and eventually closed just under 0.8550.
Technical lines, from top to bottom:
The multi year high of 0.8842 is not that far away. Below this level, the recent 2014 high of 0.8780 serves as minor resistance at the moment.
The previous 2014 peak of 0.8745 joins the chart and 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 is close by and is still of significance as a pivotal line. It is followed by the round number of 0.86, which worked as a cushion during May 2014.
The low of 0.8550 is the next stepping stone on the way down and now serves as a pivotal line in the range. 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 was 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.
I turn from bearish to neutral on NZD/USD
The kiwi indeed dropped from the highs as expected, but this may pause or fully stop now. Even though the RBNZ wants a weaker kiwi, the underlying situation of the economy remains strong. The upcoming data could balance any negative flows coming from global worries.
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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