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The  New Zealand dollar  struggled to continue advancing, as contradicting data kept it abay. What’s the next move? Trade balance and business confidence are the main events. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

The retail sales report was quite encouraging: the volume of sales grew by 1.5% in Q3, around double the expectations and at a higher pace than Q2. Also core sales grew nicely. On the other hand, the country’s main export suffered: prices of milk dropped by 3.1% in the recent auction, and this weighed on the kiwi.

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

NZDUSD November 24 28 2014 Technical analysis fundamental outlook and sentiment New Zealand dollar trading forex

  1. Visitor Arrivals: Sunday, 21:45.  Tourism, as well as other sectors of the New Zealand economy, are overshadowed by milk exports. Nevertheless, the number of visitors to New Zealand’s natural treasures has an impact on the economy. After growing by 0.9% in September, a similar growth rate is expected for October.
  2. Inflation Expectations: Tuesday, 2:00. With official inflation reports released only once per quarter, this measure of market expectations for the medium term helps assess inflation and the next moves of the central bank. In Q2, expectations slowed to 2.2%. Another slide is likely now.
  3. Trade Balance: Wednesday, 21:45. New Zealand’s balance has been negative in the past three months, jumping over a billion NZD in September. From -1350 million, a significant squeeze to -645 million is expected now, yet a return to a surplus seems unlikely and would be a pleasant surprise. The country did enjoy surpluses earlier in the year.
  4. Building Consents: Thursday, 21:45. While this is a volatile indicator, the housing sector is correlated with growth, so data is important. After a  plunge of 12.2% in September, a bounce back is likely for October, or at least we can expect to see an upwards revision of the previous drop.
  5. ANZ Business Confidence: This survey of around 1500 businesses has reached a multi-decade high in February, from where it could only fall. After bottoming out in September, we had a bounce in October to 26.5 points. A similar level is likely now. This publication usually has a strong impact on  the kiwi dollar.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar began the week on higher ground, but failed to break above resistance at 0.7975 (mentioned last week). It later bounced around and closed at 0.7878.

Live chart of NZD/USD:

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Technical lines, from top to bottom:

0.8312 was the low point in August 2014 and it also follows the downtrend support line. The next line  is 0.8270, which was the low point in September.

Further below, the round levels of 0.82 is certainly worth watching. It is followed by the  initial September low of 0.8120.

0.8075 was one of the cycle  lows and now works as resistance.  Even lower, 0.8050 provided support for the pair back in February and is the last line before the very round figure of 0.80.

0.80 is now key resistance on the upside. Just below, the old  resistance line of 0.7975 is coming back to play after capping the pair in October.

0.7930 was a double top in October’s recovery and is important to watch. It is followed by 0.7850.

0.78 is a round number and provided support various times, including recently. Going deeper, 0.7765 worked as support, and is a line to watch on the way down.

0.7715 is stronger support after serving as a cushion for the pair in September 2013.  0.7660 is the new low in November 2014, making it key support.

Below this point, we are back to levels last seen in 2012: 0.7615 is initial support and the critical line is 0.7460.

I am bullish on  NZD/USD

Retail sales joined employment data and painted a bright picture of the New Zealand economy. While the US economy is also doing well, the greenback isn’t at a rally mode. In addition, the words of finance minister Bill English about NZD/USD at “mid to high 70s” being  sustainable for the economy could also provide support.

More kiwi:

In our latest  podcast, we talk about the state of US housing, run down the FOMC  minutes, the  Japanese jump, the Draghi drama and also talk oil:

Download it directly here.