NBNZ Business Confidence is the highlight of this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.
Central bank governor Alan Bollard said New Zealand’s economy will expand next year as a result of Christchurch’ earthquake reconstruction adding an estimated 2.5% to growth. Following the rates cut of 0.25% Bollard is likely keep rates unchanged until next year.
NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
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Trade Balance: Monday, 21:45. Trade balance surplus of $11 million was registered in January with a surge in exports rising $136 million (4.3 percent) to $3.3 billion. The mechanical and electrical machinery and equipment commodity groups led the increase in imports. Trade balance surplus is expected to widen to $272 million.
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Building Consents: Tuesday, 21:45. Building permits increased 9.6% after an 18.2% plunge in the previous month. This was the biggest increase since February 2009, when permits rose 10.8%. This data was gathered before the devastating Christchurch earthquake in February however the earthquake effects will take some time to filter through to a rise in permits. February permits are likely to plunge in February and March but rise significantly later in the year.
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NBNZ Business Confidence: Thursday, 14:00. New Zealand businesses were more confident in February with 34.5 percent of respondents expecting the economy to improve over the next 12 months, compared with a net 29.5 percent in December. After the Christchurch quake, The central bank lowered rates by a 25 basis point but most economists expect the RBNZ to keep rates unchanged at 3.0 percent for this year.
* All times are GMT.
NZD/USD Technical Analysis
The kiwi made a gradual rise throughout the week. It was struggling around the 0.74 line (mentioned last week) before pushing forward and eventually closing just above the 0.7523 line.
Looking up, the first resistance line is only at 0.7655, which was a stubborn line of resistance and the highest level in the past months. It repeats the role it had back in October. It’s followed by 0.7750 which is a tough bar that served in February as resistance and as support in November.
Higher above, we find 0.7830, which was a peak in November and is stronger resistance. Even higher, the peak of 0.7975 was the 2010 high and serves as strong resistance, just under the round number of 0.80.
Looking down, 0.7523 is very close, and is a pivotal line for the beginning of the week. A failure to hold on to this line, which capped the pair recently, will open the road to 0.74, that served as support back in November.
The lines under 0.74 is very close – 0.7350 was a cushion back in December and it’s followed by 0.73, which was a stepping stone on the way up, is the first line of support at the moment, and it’s very close. It’s role is minor now. It’s followed by 0.7200, a round number that also worked as a stepping stone for the kiwi on the way up and as resistance a long time ago.
Lower, 0.7140 was a resistance line back in July and also in August, and now works as minor support. Below we find the round number of 0.70, which was a strong cap a long time ago. And just below it, important support at 0.6950 is even stronger – it was the lowest line in 6 months.
I turn bullish on NZD/USD.
As New Zealand avoided recession and managed to grow despite the earthquakes, and as the Australian dollar continues north as well, the New Zealand dollar has more room to rise.
Further reading:
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For a broad view of all the week’s major events worldwide, read the USD outlook.
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For EUR/USD, check out the Euro/Dollar forecast.
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For the Japanese yen, read the USD/JPY forecast.
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For GBP/USD (cable), look into the British Pound forecast.
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For the Australian dollar (Aussie), check out the AUD to USD forecast.
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For the New Zealand dollar (kiwi), read the NZD forecast.
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For USD/CAD (loonie), check out the Canadian dollar.
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