NZD news - page 14
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NZD/USD Fundamental Analysis – Forecast for January 2017
New Zealand Dollar
The GDT Price Index offered mixed results in December. On December 6, it posted a 3.5% gain, but the December 20 auction produced a 0.5% loss.
The highlight for the month was the surprised increase in the Gross Domestic Product. It rose 1.1% in the third quarter, beating the previous 0.7% read.
Early in the month, Reserve Bank of New Zealand governor Graeme Wheeler said he thought the economy was performing well and that he expects inflation back in the target band by the fourth quarter.
Forecast
The year ended with investors talking about the demise of the carry trade that had helped the Australian and New Zealand Dollars attract investment capital during the long period of low interest rates. Now that U.S. Treasury yields are rising and could continue to rise in 2017 due to the aggressive fiscal spending plans by new President Donald Trump, we expect to see the AUD/USD and NZD/USD pressured in 2017. The pressure could accelerate if the Fed raises rates the three times it has projected.
In January, it is going to be all about the U.S. Dollar and whether it can continue to strengthen. Towards the end of the year, concerns were being raised over Trump’s ability to run the government. A weaker dollar will be supportive for the Aussie and the Kiwi. Any rallies will be capped, however, if U.S. Treasuries continue to rise.
NZD/USD Pushes Sharply Higher To Regain The Psychological 0.7000 Handle
NZD/USD recovered on Monday to wipe out losses that resulted from Friday’s NFP report. The currency gained upside momentum in early European trading and a steady rally shows the pair trading near last week’s highs shortly after the European close.
Friday’s NFP report has triggered broad-based strength in the Greenback and resulted in a bearish engulfing print on the daily chart for NZD/USD. The technical pattern failed to elicit a continuation lower and today’s price action will renew bullish sentiment in the pair within the recovery from December 23 lows.
The currency pair turned higher in late December from important support as a level at 0.6867 marks prior resistance from the fourth quarter of 2015. Last week’s price action signaled an increase in bullish sentiment as the pair had scaled above resistance from the November low of 0.6971 but more importantly through prior support at 0.6991.
The 0.6991 price point is a major level for the currency pair as it resides within close vicinity of the psychological 0.7000 handle and held the pair higher from mid-June until mid-December. There were four tests of the level during the time and each resulted in a notable bounce. The initial breach above the level was not sustained as Friday’s price action drove the pair back below the level. Near-term price action will be critical as the support turned to resistance at 0.6991 will be viewed as a pivotal level for a directional bias.
NZ data - ANZ 'Truckometer' for December: -0.1% m/m (prior +4.0%)
This is ANZ 'Truckometer', it measures traffic flows in New Zealand as a proxy for GDP
NZD/USD Slices Through 200-Period Daily Moving Average
The Trump press conference on Wednesday renewed momentum in the NZD/USD recovery following a slowdown in the early week. The currency pair peaked near the 200 DMA on Wednesday but a bullish second attempt at the indicator today has resulted in a clear break of the moving average.
The Kiwi Dollar has led the gainer’s list on Thursday, advancing against all of its major counterparts. The Greenback had lagged for most of the day, but a recovery in North American session, as well as some bearish pressure on the Sterling as traders prepare for Theresa May’s Tuesday speech, has resulted in the British Pound taking over the lead on the decliner’s list.
The US Dollar index (DXY) followed through on the downside today but support at 100.73 has triggered a recovery. The level had held the index higher in late November and the middle of December. The turn in the North American session has erased a bulk of the daily gain and a daily close above support from last week’s lows appears probable.
Among the Kiwi cross rates, EUR/NZD fell under pressure yesterday and a break below last week’s low today has taken the pair out of a consolidation that has taken place since December 21. With the pair trading in a clear downtrend from highs in August 2015, the technical break today signals the potential for a continuation of the predominant downtrend. AUD/NZD turned lower to snap a four-day winning streak. Wednesday’s high fell short of the 200 DMA and with the pair trending lower from a high in October, there is potential for a turn lower following a test of the moving average. NZD/CHF extended higher to break a range on Wednesday, today’s gain shows the pair testing resistance from the December open. The pair had posted a bearish engulfing candle on the monthly chart for December.
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NZD/USD forecast for the week of January 16, 2017
The NZD/USD pair broke higher during the week, breaking above the top of a shooting star from the previous week. However, we are struggling at one looks to be a minor downtrend line, so I need to see this market break above the top of the range for the week to consider going long. Ultimately, if we break down and below the 0.70 level, the market should continue to drift lower. Ultimately, I think it’s going to be easier to trade this market off the daily charts if not shorter time frames.
New Zealand NZIER Business Confidence Survey: Rising Inflationary Pressures
The NZIER business confidence index recorded a further small increase for the December quarter with a net balance of 28% expecting an improvement in economic conditions over the next six months, from 26% previously and this was the highest level since June 2014.
There was a small dip confidence surrounding their own business activity to 25% from 32% previously, but overall expectations held firm.
Confidence in South Island was notably buoyant with the highest reading for confidence since early 2014. The recovery in dairy prices has been instrumental in boosting confidence despite weakness in the latest two GDT auctions.
Although confidence was firm across all sectors, it remained strongest in the building sector despite some evidence of a slight easing of activity in the residential, commercial and government sectors.
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NZ data - ANZ Consumer Confidence Index (January): 3.4% m/m (prior -2.1%)
New Zealand economic data, this from the ANZ Bank, their Consumer Confidence Index for January.
NZD/USD: Targeting A Retest Of The Broken Uptrend Channel
Price is in the process of completing its fourth consecutive up week. This aggressive bounce has negated the downtrend that began in September 2016 at 0.7486 (downtrend break confirmed by the recent close above 0.7095 - 61.8% retrace). This downtrend was material in magnitude but fell some 150-200 points short of our aggressive downside target at 0.6650/0.6700.
The upswing to date is yet to retest the broken uptrend channel at 0.7310/30. This is a likely interim target and level that must be broken if a more sustainable uptrend is to be maintained.
At this time we are comfortable targeting 0.7310/30 but prefer to take a wait and see approach to further gains depending upon the price response to this key resistance levels.
A weekly close above 0.7330 would imply a retest of the 2016 highs at 0.7403/0.7486.
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NZD/USD To Trade Above 0.70 For Most Of Q1: What's Next?
The NZD ended 2016 on a soft note, and it wasn’t just a strong USD story as the NZD was weaker in December on most of the major crosses. On our short term fair value model, NZD weakness was inexplicable in light of an improving risk appetite environment and commodity prices holding up.
Over the past couple of months fair value on our model has oscillated in a USD0.72-0.74 range.
We think that the NZD has been dragged lower by the weaker Asian currency dynamic that has been in play since late last year, a factor which the model does not incorporate.
A period of consolidation for the USD and a short-term recovery in Asian currencies could easily see the NZD climb back inside our fair value range.
Our forecasts are unchanged, which sees the NZD end the quarter at USD0.70, but we think the bias is for the currency to trade much of the quarter above that threshold.
Beyond our positive short-term view on Kiwi, the bias is expected to be one of downward pressure, largely reflecting our strong USD story. Domestic drivers are positive for the NZD but this is expected to play out via the NZD crosses holding their value or appreciating a little, amidst a softer expected NZD/USD profile. Our year-end target remains at USD0.67.
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NZD/USD Rallies As The Greenback Remains Under Pressure
NZD/USD advanced on the back of a weaker Dollar on Monday. The pair has made a marginal high above the prior week high and is approaching resistance from price action that dates back to the December Fed meeting.
The trade-weighted US Dollar index gapped lower at the open this week and has fallen to fresh six-week lows. The index found some support at the prior week’s low during early European trading but fell through the level after the North American open. DXY was last seen trading at 100.16 for a loss of 0.64% while NZD/USD traded at 0.7222 for a gain of 0.82%.
The Kiwi Dollar shows the largest gains among the major commodity currency pairs and the third largest gains among its major counterparts. The US Dollar leads the decliner’s list, posting losses against all of its major counterparts while the Japanese Yen leads the gainers.
Inflation data out of New Zealand, scheduled for release on Wednesday, is likely to be the biggest economic driver for the pair this week. Recent communication from the RBNZ suggests that the figure will improve as the central bank expects that rising oil prices will cause inflation to fall back within the lower bound of the target range. The analyst expectation, however, has been set at 0.3%, only 0.1% higher than the previous reading. The most notable economic releases out of the United States will be the first reading of fourth quarter GDP and core durable goods orders, both scheduled for release on Friday.
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