The kiwi suffered another week of significant losses, hurt by the deteriorating debt crisis in Europe. Will the re-election of John Key help the New Zealand dollar stabilize? NBNZ Business Confidence and building consents are the main events this week. Here’s an outlook for the events in New Zealand, and an updated technical analysis for NZD/USD
Last week inflation expectations dropped 0.1% to 2.8% during the fourth quarter indicating NZ is not at facing inflation risks and Trade balance also indicated a positive trend narrowing its deficit to 282 million from 789 million in the previous month. Will New Zealand continue to grow in light of the current global turmoil?
Updates: The re-election of John Key’s government and more importantly the temporary relief felt in Europe both helped the kiwi recover and struggle with 0.7550. NZD/USD made a sharp move higher and stopped at around 0.7650. The results of New Zealand’s building consents are now awaited. A rise of over 11% in building consents helped the kiwi, and the swap rate cut decision also pushed NZD/USD to challenge the 0.7825 line. These types of rallies are usually limited. The kiwi is enjoying risk trade before the US Non-Farm Payrolls are released. There is hope that America will pull the world forward.
- NBNZ Business Confidence: Monday, 0:00.Growing pessimism among NZ businesses amid a sharp drop in October to 13.2 from30.3 in September. NZ Business Confidence was affected by the European debt crisis despite its distance from the European continent.
- Building Consents: Tuesday, 21:45. New Zealand building consents dropped 17.1% in September. The decline comes after the strong growth in the past two months amid consents for reconstruction in Christchurch. Building activity in Canterbury has halted in the last few months due to seismic activity preventing reconstruction activity in Christchurch.
- Overseas Trade Index: Wednesday, 21:45. New Zealand’s terms of trade rose 2.3% in the second quarter amid gains in export prices of dairy products, petrol products, meat and wool. Export prices climbed vy 1.8% while import prices decreased by 0.5%. Economists believe export prices will decrease in the next two years which will affect the Overseas Trade Index. an increase of 3.4% is expected now.
- ANZ Commodity Prices: Thursday, 21:45. New Zealand commodity prices plunged 3.5% in October following 1.3% drop in September. The major drop was led by dairy products and kiwifruit.
* All times are GMT.
NZD/USD Technical Analysis
The fall continued. Kiwi/dollar struggled with the 0.7470 line (mentioned last week) and after this battle was lost, it bounced off only at 0.7370, a new line on the chart.
Technical lines from top to bottom:
We start from a much lower point this time. 0.7825 is of historic importance, as it capped the pair three times, in January and in September, and provided support in April. 0.7732 proved to be a significant line – very distinct in separating ranges.
0.7637 was a swing low in September and now switches to resistance. 0.7550 now has a stronger role after stopping the fall o fthe kiwi. It had a similar role back in January.
0.7470 was the trough in October and was very strong support before 0.7550 was broken. It now switches to resistance. The fresh low of 0.7370 is a fresh minor line of support.
Further below, we reach lines last seen at the beginning of the year: 0.7340 worked as support at the end of 2010 and at the beginning of 2011. It had a similar role in March. 0.7250 is another minor cushion on the way down.
The round number of 0.72 worked as support back in 2009, and the last line for now is 0.71, which was a swing low in March 2011.
I remain bearish on NZD/USD
It is not only Europe that is pushing the greenback higher and the kiwi dollar lower, but also the growing fear about a “hard landing” in China. The recent PMI was very worrying. So, there is still room for more falls.
- 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
- For the Swiss Franc, see the USD/CHF forecast.