NZD/USD Outlook – August 15-19

The New Zealand dollar suffered from the global turmoil and traded lower, in an unusually  choppy manner. Producer price index is the major event this week. Here’s an  outlook  for the events in New  Zealand, and an updated technical analysis for NZD/USD

Last week small drops in Business NZ Manufacturing Index decreasing to 53.2 from 54.3   and REINZ house price index sliding 0.6% after 1.3% gain  reflecting a slow week for the NZ economy.

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

1. PPI  Input: Tuesday, 22:45. Producer material purchases increased  more-than-expected in the first quarter to a seasonally adjusted 2.2%,  from 0.9% in the prior quarter. Analysts expected PPI input to gain 0.9%   in the last quarter. 1.2% increase is expected.
2. PPI Output: Thursday, 22:45. Producer selling prices increased by 1.7% in the first quarter of 2011, well above the 0.6% gain predicted, and beyond the 0.2% increase in the previous quarter. This reading indicates healthy  market activity. An increase of 0.8% is forecasted.
3. Credit Card Spending: Friday, 3:00. Credit card spending in New Zealand improved in June rising a seasonally adjusted 4.5 percent year-on-year,   though less than the 5.5% gain in May indicating better market conditions.

*All times are GMT.

NZD/USD  Technical  Analysis

The kiwi started the week with a huge fall, as expected. It went as low as the previous post crisis peak of 0.7975 (discussed last week), but managed to recover and close with a more acceptable drop.

We start from a higher peak – 0.8843. It’s closely followed by 0.88 which is also distant resistance.

Below, the previous peak of 0.8675 switched positions to resistance very quickly, and is a strong line now. It is closely followed by 0.8620, which was the lower border of a temporary range. It’s a minor line.

Further support turned resistance is at 0.8580,  but managed to play in both directions during July and now as well.  It is followed by 0.8410 – which turned into a very important line – capping the recovery.

0.83 became more distinctive a few weeks ago, by separating ranges (like the previous line), and remains of high importance. It managed to work in both directions just now. The kiwi eventually managed to get above this line.  0.8240 proved to be an important line of support some time ago, and worked as minor resistance.

The 81 line, followed by 0.8080 also provided resistance in the past, but are now support. once again. This region provided a cushion after the recovery move.

Below, 0.7975 was a long running peak and proved to be relevant once again as the swing low of the big fall. A drop below this line will open the road to 0.7875, followed by 0.7825.

I remain neutral on NZD/USD.

After the markets seemed to have stabilized, New Zealand’s strong fundamentals can  help  the currency. But with no QE in the US to push commodities higher, any move is likely to be limited.

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
• For the  Swiss Franc, see the  USD/CHF  forecast.