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The  New Zealand dollar  created an impressive double-top on high ground only to fall down. Where is it headed next? An RBNZ report and retail sales stand out.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Milk prices dropped once again, ending two auctions that saw rises. However, the jobs report was positive: higher wages and and 1.2% jump in employment beat the rise in the unemployment rate in New Zealand. Despite this data,  NZD/USD was hit by a rising US dollar, which enjoyed a big turnaround. In addition, the kiwi was influenced by the Aussie: the RBA  cut rates and  market participation suspect the RBNZ is next.

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NZD/USD  daily graph  with support and resistance lines on it. Click to enlarge:

NZDUSD May 9 13 2016 technical graph

  1. RBNZ Financial Stability Report: Tuesday, 21:00, with follow-up appearances by RBNZ governor Graeme Wheeler  on Wednesday at 1:10. The central bank releases this report twice a year and in theory it focuses on financial stability. However, it usually encompasses other economic aspects such as growth, inflation, etc. The governor could use the report or at least his public appearance to let his views known about the next moves of the RBNZ, especially in light of the RBA cut.
  2. Business NZ Manufacturing Index: Wednesday, 22:30. This  PMI like  gauge of the manufacturing sector has been quite positive of late. After 54.7  for March, a similar  number is likely for April.
  3. FPI: Wednesday, 22:45. The Food Price Index provides some insights about New Zealand’s food exports. Prices  rose by 0.5% in March. Remember that the GDT number is of higher importance.
  4. Retail sales: Thursday, 22:45. As with many other NZ indicators, it is only a quarterly publication, making it far more important than the monthly data published elsewhere. A gain of 1.2% was seen in Q4 2015 and a rise of 1% is on the cards now. Core sales carry expectations for 1.1% after 1.4% beforehand.

NZD/USD  Technical  Analysis

Kiwi/dollar  made a big move to 0.7050, creating a double top.. But from there, it fell to challenge support at 0.6820.

Technical lines, from top to bottom:

0.7160 worked as  support when the kiwi was trading on much higher ground in 2014.  0.7050 was the high in  April 2015.

The round level of 0.70 is still important because of its roundness but it isn’t really strong.  The low of 0.6940 allowed for a temporary bounce.

The round 0.69 level has  switched positions to resistance.  0.6860 was a low point as the pair dropped in June 2015. 0.6820 is worth noting after it capped the pair  in March 2016.

It is followed by  0.6780 that capped the pair in recent months.  The  round level of 0.67 that works nicely as support.  Another line worth noting is 0.6640, which capped the pair in November.

The post crisis low of 0.6560 is still of importance.  Below, the round 0.65 level is of high importance now, serving as support.

I remain  bearish  on  NZD/USD

The RBNZ  might already be readying a second rate cut this year, especially after the Australian move. It will not be surprising to see the RBNZ hit the kiwi hard this week.

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