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The  New Zealand Building Consents  indicator, released   monthly,  measures the change in the number of new building approvals issued. It is one of the most important indicators  for the construction sector. A reading  which is higher than the market prediction is bullish for the  New  Zealand  dollar.

 Here are all the details, and 5 possible outcomes for NZD/USD.

Published on Monday at 21:45 GMT.

Indicator Background

An increase in building approvals indicates an expansion of construction activity, which in turn is a critical component of economic growth. Conversely, negative readings indicates a contraction in building activity.  

The Building Consents indicator tends to fluctuate sharply, making accurate market  forecasts difficult.    After an excellent reading in November  showed an  11.2% increase, the indicator  plummeted last month,  recording a contraction of 6.4%.  The market forecast for the January reading calls for a sharp increase of 8%, which would be an outstanding reading.

Sentiments and levels

Bernanke’s soft monetary policy  has been providing a  boost for the kiwi,  which is a commodity currency that is less vulnerable to shocks.  However,  the kiwi has  had an impressive rally  against the greenback and is now in overbought territory. Any bad news from Europe could bring a correction to NZD/USD. So, the overall sentiment is neutral  on NZD/USD towards this release.

Technical levels, from top to bottom: 0.8505, 0.84, 0.8340, 0.8240, 0.8165,  0.8110 and 0.8070.

5 Scenarios

  1. Within expectations:  6% to 10%: In such a case,  NZD/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 10% to 12%: An unexpected higher reading can send NZD/USD well above one resistance line.
  3. Well above expectations: Above 12%: Such an outcome would prop up the pair, and a second resistance line might be broken as a result.
  4. Below expectations: 4% to 6%%: A sharper decrease than forecast could push the kiwi below one level of support.
  5. Well below expectations: Below 4%: A reading much lower than forecast will cause NZD/USD to drop, possibly breaking a second  support level.

For more about the New Zealand dollar, see the  NZD to USD forecast.

 

 

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