Inflation Expectations is the major event this week. Here is a review of the coming events and an updated technical analysis for NZD/USD.
Ratings company Moody’s Investors Service may downgrade ratings for New Zealand’s banks since 40% of their total funding is based on wholesale funding making them vulnerable to shifts in investor confidence and New Zealand lenders’ reliance on foreign funding results in a low liquid asset coverage of their respective wholesale liabilities. Will this have a lasting effect on NZ economy?
NZD/USD daily chart with support and resistance lines marked on it:
Credit Card Spending: Monday, 2:00. On a year-over-year basis, Credit Card Spending was up 2% in December, down from a 3.7% increase a month earlier indicating retail activity had weakened during the holiday season. A similar figure is expected now.
Inflation Expectations: Tuesday, 2:00. New Zealand business managers kept their expectations for the nation’s inflation rate unchanged at 2.6% shown in a survey conducted for the central bank. Inflation will average 2.6 % in two years’ time, according to the 78 business. Inflation rate is expected to remain around 2.6%.
* All times are GMT.
NZD/USD Technical Analysis
The kiwi had a weak start to the week, falling and temporarily breaching the 0.7523 line discussed last week. It then recovered and bounced off the 0.7644 line.
Looking down, we just witnessed how 0.7523, that was a swing high quite some time ago, provided support for the kiwi once again. It’s followed by another line of importance, 0.74 – it prevented further falls a few months ago.
Lower, when the 0.74 line was indeed broken, the pair found support close by, at 0.7350 – which is now of high importance as well. It’s followed by, 0.7210 which as a stepping stone for the kiwi on the way up and now provides support.
Further below, 0.7140 was a resistance line back in July and also in August, and now works as support. The last line for now is 0.6950, which was the lowest line in 6 months.
Looking up, initial yet weak resistance appears at 0.7644, which was a peak a few months ago, and played a minor role since then. Next resistance is very close – at 0.7673, which was a tough peak a few weeks ago.
Above, 0.7738 is is a tough cap above – that couldn’t be conquered in recent months. It’s followed by 0.7836, which was a peak in November and is stronger resistance.
Higher above, the peak of 0.7975 was the 2010 high and serves as strong resistance, just under the round number of 0.80. Even higher, 0.81 was an important resistance level back in 2008, and it’s followed by the all-time high of 0.8214.
I remain neutral on NZD/USD.
The improving US economy balances the rise in commodity prices. The economy in New Zealand is still somewhat fragile, especially in comparison to other countries in its region.
For a broad view of all the week’s major events worldwide, read the USD outlook.
For EUR/USD, check out the Euro/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.