The New Zealand dollar dropped for a second week in a row, as risk sentiment faded away. The rate decision is the main event of the upcoming week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD.
Last week, building consents edged up 8.3% in January following a revised gain of 2.6% in December and NBNZ Business Confidence soared from16.9 in January to 28 in February indicating an improvement in NZ economy. Will this positive trend continue?
Updates: NZD/USD closed at 0.8230, its lowest level in over a month. Commodity prices dropped to a disappointing 0.0% in February. The New Zealand dollar fell below the 0.82 level, trading at 0.8183. Official Cash Rate remained steady at 2.5%. Manufacturing Sales were up 1.2%, exceeding market expectations. New Zealand dollar was up sharply, trading at 0.8260.
- Rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand (RBNZ) kept its benchmark interest rate at 2.5% and maintained its monetary policy in light of worsening economic outlook for global and domestic activity. New Zealand Manufacturers and Exporters Association (NZMEA) claim NZ government should do more to boost exports and by using unorthodox monetary policy practiced in other countries like printing more money to reduce the Kiwi dollar value. Rate is expected to remain at 2.5%.
- Manufacturing Sales: Wednesday, 21:45.New Zealand’s manufacturing sector softened in the 3rd quarter with a flat reading, following 2.1% growth in the second quarter. The possible reason for this decline is a temporary slowdown in manufacturing activity during the Rugby World Cup together with uncertainty about the global financial outlook. A rise of 0.3% is expected now.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar began the week with a rise and struggle around the 0.84 line. A move higher didn’t last too long, and the pair returned to the 0.8340 to 0.84 range (discussed last week). It finally moved lower and closed at 0.8288.
Technical lines, from top to bottom:
We begin from a lower point this week. 0.8680 which was support on high ground is a minor line of resistance in the distance. 0.8620 follows closely and also was support on high ground during the summer.
0.8573 was a stubborn line of resistance during August 2011 and remains of high importance. 0.8505 was a peak on the way up during July. A move higher in February 2012 fell short of this line.
The 0.84 line separated ranges in August 2011, and earlier served as support when the kiwi traded higher. While this line was hurt recently, it still serves as a serious cap. 0.8340 was a peak in September and now returns to support. It was a tough line of struggle in February 2012.
0.8240 was a peak in October and also back in May 2011. It proved its strength in January 2012 and will be tested again quite soon if the pair falls. Moving lower, we find 0.8165. It provided support for the pair at several occasions, last seen in October. After being crossed on the way up, its strength is lower.
0.8110 switched positions from support in August to resistance later on and is a minor line, now on the way down. 0.8070 was resistance in October and support beforehand.. It was also tested in January.
The round number of 0.80 managed to cap the pair in November and remains of high importance, especially due to its psychological importance. Another round number, 0.79, is now stronger resistance after capping a rise at the beginning of 2012.
0.7840 worked as cap for a range and earlier stopped the pair in October. It then became much stronger in December, holding the range. The pair approached in the last days of 2011, but couldn’t really challenge it. 0.7773 was the bottom border of a range at the beginning of 2012, and also in December.
0.77 provided support in December and is now minor support. 0.7637 was a swing low in September and provided its strength in December as a swing low. It is a still strong, after capping a recovery attempt in December.
0.7550 now has a stronger role after working as a very distinct line separating ranges. It had a similar role back in January.
I am bearish on NZD/USD
Bernanke’s small hint about improving employment certainly took out the air out of QE3, one of the main drivers of the kiwi higher. With Greece hanging on a cliff towards the unmovable deadline, there’s lots of room for falls for a risk currency like the kiwi.
- 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 forecast
- For the Swiss Franc, see the USD/CHF forecast.