The rate decision is the centerpiece of this week’s events in New Zealand, especially regarding future prospects. Here’s an outlook for the events and an updated technical analysis for NZD/USD.
NZD/USD daily chart with support and resistance lines marked. Click to enlarge:
Indeed, as risk aversion returned, the kiwi weakened. Will this continue this week?
- NBNZ Business Confidence: Wednesday, 2:00. About 1500 business are surveyed for this official report by the central bank. After reaching almost 50 points, the past five months saw quick deterioration of this index. Last month’s score of 13.5 points was the lowest in over a year. A similar figure is expected now. A drop to a negative number, meaning pessimism will hurt the kiwi.
- Rate decision: Thursday, 20:00. Alan Bollard and his colleagues at the RBNZ are expected to leave the Official Cash Rate unchanged for a second time in a row. After two rate hikes to 3%, the economy showed signs of a slowdown, especially regarding unemployment. No threat comes from inflation. The kiwi will probably move on the accompanying statement about future policy, that might also relate to the G20 meetings.
- Building Consents: Thursday, 21:45. This figure is usually called building approvals in other countries. Last month was terrible for the housing sector, with a huge plunge of 17.8% in consents – a big move even for this volatile indicator. A correction is expected this time, but the rise won’t be as big as last time.
- Trade Balance: Thursday, 21:45. New Zealand suffered from a deficit in its trade balance in the past two months, disappointing the kiwi. After the deficit widened to 437 million, it’s now expected to squeeze back to 245. A surplus will be positive for the kiwi.
NZD/USD Technical Analysis
The kiwi made a failed attempt to cross 0.76 (mentioned last week) and dropped sharply. It bottomed out above 0.7416 to close at 0.7462, a weekly loss of about 100 pips.
0.7416 was a peak in the previous month, and now cushioned the fall of NZD/USD. It provides strong and immediate resistance. More support is found at 0.7355 which capped NZD/USD in the summer.
Even 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, minor resistance appears at 0.7523, which was a peak in November 2009. Higher, the 0.76 is already a very strong resistance line, serving as such in the past week.
Above, 0.7634 was a peak in October and is the highest level in two years. Beyond, 0.7760 and 0.7920 are distant lines that were last seen in 2008. These lines are followed by the round psychological number of 0.80.
I remain bearish on NZD/USD.
As the tables are turning in favor of the US dollar all over the world, the New Zealand dollar doesn’t have the strength to oppose it.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro/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.
Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..