The kiwi couldn’t weather the global storm and lost some ground. Inflation Expectations and Retail sales are the main events this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD
Last week was good for the manufacturing sector when raw material prices gained less than the 1.2% increase expected rising by 0.9% while the selling price increased above predictions by 1.4% in the second quarter of 2011. Will this trend continue?
- Inflation Expectations: Tuesday, 3:00. In May,New Zealand business executives predicted inflation will rise to 3.0% in two years time. This figure was higher than the 2.64% expected in April due to the extensive rebuilding activity following theChristchurch earthquake.
- Trade Balance: Tuesday, 22:45.New Zealand trade surplus narrowed in June to NZ$230 from NZ$552 million in May while economists predicted a smaller decrease to NZ391 million. The slowdown in exports is mainly due to the earthquake inChristchurch. Nevertheless GDP expanded during the first quarter of 2011 indicating NZ economy is marching foreward.
- Retail sales: Wednesday, 22:45. New Zealand retail sales expanded for the first time in three quarters, since the earthquake inChristchurch increasing by 0.9% in the first quarter of 2011 after contracting 0.4% in the last quarter of 2010. The main reasons for this increase are improved job market conditions and consumer spending. Meantime core sales excluding vehicles and energy gained 0.7% in the first quarter following a flat reading in the last quarter of 2010.
- FPI : Wednesday, 22:45.New Zealand food prices edged up further in June rising by 1.4% after increasing by 0.5% in May, amid fruit and vegetable appreciation. The government’s increase of consumption tax last year, gave room for a rise in commodity prices.
- Jackson Hole Symposium: Thu-Sat. Jackson Hole Symposium in Wyoming is a big economic event attended by central bankers, finance ministers, academics, and financial market participants from around the world. Although the meetings are closed to the press, valuable information could be gathered from statements of officials to the press. Federal Reserve chairman Ben Bernanke will face tough questions in light of the slowdown in theUS economy and may give important hints on a possible QE3.
* All times are GMT.
NZD/USD Technical Analysis
The kiwi traded in a range between 0.8275 and 0.8410 (mentioned last week), before falling and eventually also losing the 0.8240 line.
Technical lines from top to bottom:
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. 0.8505 is also a notable point. It is followed by 0.8410 – which turned into a very important line – capping the recovery a few weeks ago and now capping the range.
0.8275, which worked as support and later as resistance replaces the 0.83 line.and is likely to cap any recovery attempt. 0.8240 managed to hold the pair down, and was only temporarily breached. 0.8150, which prevented a deeper fall now, is the next line.
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 turn bearish on NZD/USD.
As signs of slowdown are felt all over the world, the kiwi turns into one of the victims. An announcement of QE3 by Bernanke can boost the pair, but this seems highly unlikely.
- 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.