NZD/USD: Trading the New Zealand GDP Release

After NZD/USD tested new highs, it will now face a significant test with the release of GDP in New Zealand. The publication, which is first and final, provides a trading opportunity.

Here are the details and 5 possible scenarios for NZD/USD.

Update: The publication was postponed by one week, to July 13th, 22:45 GMT.

Indicator Background

This overall measure of the economy is usually released earlier in other countries, which sometimes provide more than one release. In New Zealand the wait is long but the figure is final. This publication is of high interest due to the catastrophic earthquake that hit Christchurch during Q1.

The earthquake was a challenge for the economy. The RBNZ cut rats sharply, from 3% to 2.5%, and didn’t raise them since then.

On the other hand, other signs were quite encouraging since then, and the kiwi made a huge comeback, reaching new records, with the last one being last week.

Also before the quake, the economy was shaky. It contracted in Q3 of 2010 only to grow at the same scale at Q4.

Expectations now are cautiously optimistic. A growth rate of 0.3% is predicted. This is based on the aforementioned positive indicators, such as retail sales.

Sentiment and Levels

While the kiwi managed to break higher after the Greek vote that calmed investors worldwide, the atmosphere is slightly different. There are fears that Greece will still reach a state of default, and this helps the US dollar. In addition, QE2 is now over in the US.

So, the US dollar is now equally positioned against the New Zealand dollar.

Technical levels, from top to bottom: 0.84, 0.83, 0.8215, 0.81, 0.7975, 0.7875 and 0.7825.

5 Sceanrios

1. Within Expectations: +0.3% to 0.4%: In this case, NZD/USD will shake but is likely to remain within the same trading range.
2. Above expectations: +0.5% to +0.7%: Strong growth in New Zealand will prove that the economy made overcame the crisis. The pair is likely to break one level of resistance on such an outcome.
3. Well above expectations: +0.8% or better: This will be a big surprise. A second level of resistance might be challenged and new all time highs cannot are feasible.
4. Below expectations: 0% to +0.2%: Low growth will weigh on the pair, and it can drift down and lose one level of support.
5. Well below expectations: A negative number. This option cannot be ruled out, as the damage from the earthquake was severe. was severe. In such a case, NZD/USD will fall and can lose a second level, and perhaps more.

For more on the kiwi, see the NZD USD forecast.