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The kiwi made an impressive comeback and challenged resistance. Inflation Expectations is the only major event this week. Here is outlook and an updated technical analysis for NZD/USD.

New Zealand plans to reduce spending and sell assets to balance its budget in the next four years in order to keep debt in check to get approved by the rating agencies and leave the negative credit watch.

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

NZD USD chart May 23 27

  1. Inflation Expectations: Tuesday, 4:00. NZIER economists believe New  Zealand’s economy will be bad until 2013 due to Canterbury’s two earthquakes destroying the area and damaging NZ recovery. The two year forecast stood at 2.6% in February and will be lower in the next two years before the expected recovery in 2013.

* All times are GMT.

NZD/USD Technical  Analysis

After an initial fall at the beginning of the week, the New Zealand dollar made an impressive recovery and challenged the 0.7975 line (discussed last week). It temporarily breached it and touched 0.80, but eventually closer lower.

Technical levels from top to bottom:

The all-time high of 0.8215 is naturally the highest point. The pair is getting closer to this area. . The 81 line, which was also a line of resistance now and also in the previous rise, remains strong resistance.

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, is a pivotal line now.

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. The last line for now is the December trough of 0.7350.

I remain neutral on NZD/USD.

The pause in the dollar strength allowed the kiwi to recover, but its gains were still limited. Further consolidation is likely before fresh moves.

Further reading: