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The  New Zealand dollar  had an exciting week, alongside all the market, and in general, showed a lot of strength. The main event in the upcoming week is the quarterly CPI release.  Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Prices of milk changed course and rose by 1.4%, after a plunge of 7.3% last time. The dairy dependent country’s currency certainly liked this. Also Business NZ’s Manufacturing Index was on the rise and reflects strong growth with 58 points.  The kiwi managed to perform well in the global storm  that hurt stock and commodity markets. A weaker than expected retail sales number in the US  triggered a wide sell off, hurting the dollar and stocks.

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

NZD USD October 20 24 2014 technical daily forex chart support resistance fundamental outlook sentiment New Zealand dollar trading

  1. Visitor Arrivals: Monday, 21:45. Tourism is important to the New Zealand economy:  it is also the Land of the Lord of the Rings and not only a milk  producing country. After a drop of 3% in  August, a small rise is expected in September, the first month of the spring.
  2. Credit Card Spending: Tuesday, 2:00. With retail sales published only once per quarter, this monthly publication helps get an assessment on consumer spending. A y/y rise of 4.2% was seen last month and a slower growth rate is likely now.
  3. CPI: Wednesday, 21:45. This is the key event, as it can determine the next move from the RBNZ. The quarterly publication, contrary to a monthly one by most countries, gives it extra importance. A meager rise of 0.3% was reported in Q2. It was the second quarter of undershoots in inflation. A third quarter of low inflation is likely, given the trend in the global economy and the fall of commodity prices.  However, the weaker NZD during this quarter could have pushed import prices higher.
  4. Trade Balance: Thursday, 21:45. In the past two months, New Zealand experienced trade deficits, after a long period of surpluses. However, the deficit for August was narrower than predicted: 472 million. A similar number is due this time.

* All times are GMT.

NZD/USD  Technical  Analysis

Kiwi/dollar began the week with a slide towards the 0.78 level (mentioned last week) before shooting higher and almost touching the very round 0.80 line. It then slipped lower only to bounce again. Moves were somewhat wild.

Live chart of NZD/USD:

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Technical lines, from top to bottom:

We start from higher ground this time. 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.

I am bullish  on  NZD/USD

The kiwi has shown a lot of resilience in the “risk off” environment which usually hurts the currency. Even if the path to tightening in the US is set, New Zealand can certainly come on top with its higher interest rates. The carry trade is still here.

More: NZD/USD appears on the list of the 5 most predictable currency pairs.

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