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Inflation expectations are the highlight of a relatively light week for kiwi traders. Here’s an outlook for the events in New Zealand and an updated technical analysis for NZD/USD.

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

nzd usd forecast November 22-26

The kiwi had a V-shaped week, falling to lows and then gradually recovering. Will this be seen again now? Let’s start:

  1. Visitor Arrivals: Sunday, 21:45. One of the important sectors of the economy in New Zealand is tourism, making this indicator important for the currency. The past three months saw rises of around 0.7% to 0.9% in the number of visitors. A similar rise is expected now.
  2. Inflation Expectations: Tuesday, 2:00. As CPI is published only once a quarter, any inflation-related figure is important especially if it’s a quarterly figure as well. In the past year, inflation expectations were between 2.6% to 2.8%. They’re expected at the same levels in Q3 as well, but note that any result, even if it isn’t a surprise, will rock the kiwi.

* All times are GMT.

NZD/USD Technical Analysis

At the beginning of the week, the kiwi fell to the 0.7644 line and then bounced back up. and traded around the pivotal 0.7760 line (mentioned last week) before closing just above it, at 0.7771, a weekly gain of about 50 pips.

Looking down below the pivotal line, next support appears at  0.7644. This line capped the pair back in October 2009, and also capped the pair in recent weeks. It is the next point of support.

Lower, 0.7523 was a high peak on the kiwi’s way down more than a year ago.  The next cushion is at 0.74, which held the kiwi in the previous month, and also slowed a fall of NZD/USD.

More support is found at 0.7355 which capped NZD/USD in the summer.  Lower, 0.73 and 0.72 also worked as support and resistance lines in recent months, and are now getting closer. The round number of 0.70 is a strong and distant support line.

Looking up, 0.7890 was another resistance line in the past, July 2008, and now caps the pair.  The round number of 0.80 was almost reached in two weeks ago, and is a strong point of resistance. Even higher, 0.81 was a peak in March 2008 and also back in July 2007, and is now minor resistance.

The all time high of 0.8214 serves as the ultimate resistance line – it worked as resistance twice at the beginning of 2008, making it very strong.

I remain bullish on NZD/USD.

The kiwi has more room to advance, at least as China doesn’t raise the interest rate in an extreme manner. Commodities should continue boosting the pair higher – a result of the US QE2.

Further reading:

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