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The  New Zealand dollar  managed to move higher once again but eventually tumbled down. After we heard from the central bank, the quarterly employment data is the big event for the upcoming week.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

The ANZ Business Confidence indicator finally bounced off the bottom, shying away from a pessimistic  outlook. The RBNZ  surprised by not only complaining about the exchange rate, but also  dropping a hint that this tightening cycle is over. Many now expect the Bank to leave rates unchanged for another year. In the US, the Fed  ended QE and sounded upbeat on the situation of the US labor market. All this weakened NZD/USD but wasn’t as devastating as one would have expected.

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

NZDUSD November 3 7 2014 technical analysis daily forex graph New Zealand dollar USD forecast

  1. ANZ Commodity Prices:  Tuesday, 00:00. As an exporter of commodities, this wide index has an influence on the kiwi, even though the specific price of milk has a stronger impact of late. It fell 1.3% last time, and could rebound this time.
  2. GDT Price Index: Wednesday, time unknown. The Global Dairy Trade has a big impact as milk products are key to the economy. After a big fall 4 weeks ago of 7.3%, prices bounced back two weeks ago. Another nudge higher is expected.
  3. Employment data: Tuesday, 21:45. New Zealand stands out by releasing employment data only once per quarter, making it very important.  Employment rose by 0.4% in Q2, worse than expected, and it is now expected to pick up and rise by 0.6%. The unemployment rate dropped to a low of 5.6%, but it enjoyed the fall of the participation rate. Another slide to 5.5% is expected. It is also important to follow the labor cost index: wages have rise by 0.6% in Q2 and are expected to rise by 0.5% in Q3 2014.  An accelerated rise in wages means more pressure on the RBNZ to move on rates, but it’s hard to see that happening at the moment.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar began the week with a rise until it met the 0.7975 line (mentioned last week). But from there, it was all downhill, and the pair bounced off only at the 0.7765 level. A second rally didn’t go to far and the pair eventually fell below 0.78.

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. 0.7685 is very strong support and it held the pair back in the summer of 2013.

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

Downtrend line comes into play

The pair traded above a downtrend support line that  accompanied it from July and eventually dropped below this line. However, the recent recovery sent it to tackle the line once again, but couldn’t break above it.

I remain bearish on  NZD/USD

If we had the the Fed on a tightening course and the RBNZ in an even stronger tightening mode so far, things have changed in favor of the USD: the Fed became more hawkish and the RBNZ’s tightening bias ground to a halt. In addition, the  high expectations from New Zealand’s employment data seem somewhat too high, and that could lead to a  disappointment hitting the kiwi.

More kiwi:

In our latest podcast, we  review  November’s big event and run down the recent ones:

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Further reading: