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The kiwi broke to historic highs, but could not hold on to them. The rate decision is the key event this week alongside other RBNZ related events. Here is an outlook for the events awaiting the New Zealand dollar, and an updated technical analysis for USD/NZD.

The kiwi soared to its highest level in 26 years reaching $0.8216 after rising demand for New Zealand assets and increasing activity in the market. This may lead RBNZ to consider rate hike before the end of the year.

NZD/USD daily chart with support and resistance lines on it. Click to enlarge:NZD USD chart  June 6 10 2011

  1. Rate Decision: Wednesday, 22:00. The Reserve Bank of New Zealand left the benchmark interest rate unchanged in line with expectations at 2.5%.   With decreasing business confidence, consumer sentiment, and tourism flow following the second earthquake, the state of affairs is vague requiring stability in interest rates.   No change in rates is expected.
  2. RBNZ Monetary Policy Statement: Wednesday, 22:00. Alan Bollard Reserve Bank Governor is expected to maintain the Official Cash rate (OCR) in light of a surge in home loans totaling NZ$168.001 billion thanks to the low OCR.
  3. Alan Bollard speaks: Thursday, 2:15 Alan Bollard RBNZ Governor will speak about monetary policy in Wellington his words may affect the market.
  4. REINZ HPI: Thu-Mon. The REINZ’s house price index rose 1.1% in April following 0.5% gain in the previous month. A similar rise is predicted.

* All times are GMT.

NZD/USD Technical  Analysis

The New Zealand dollar was initially capped by the 0.8214 line -the previous historic high (mentioned last week). Later on, it managed to break higher and reach a peak at 0.8263, before retreating and closing not too far off from last week’s close.

Technical levels from top to bottom:

The fresh all time high of 0.8263 is now the top line. Above this, it is uncharted territory. The previous all-time high of 0.8215 is still important just below

The 81 line, which was also a line of resistance in the past, proved to be a good point of support just now.  The previous post crisis high of 0.7975 remains an important line, remaining very distinctive, separating ranges. The importance of this line was seen just now.

100 pips lower, we meet 0.7875, which was support in 2010, and will be a line of support on a fall of the pair.  0.7825 is important support after capping the pair at the beginning of the year, and working as support twice in the past month. It’s somewhat weaker now.

0.7746 worked as support in November and as resistance in January and proved to be important support now. Further support is found at the 0.7655 peak seen in February.

0.7523 is a veteran resistance line, that worked as strong support in January and remains important. 0.74 was a line of support twice in during the fall and is the next line.

I am neutral on NZD/USD.

The New Zealand dollar found it hard to hold on to the new peaks, and didn’t get too far off. The slowdown in the global economy, especially in China but also in the US, limits the gains of the kiwi.

Further reading: