Weekly Recap and Outlook for NZDUSD - 7/19/2010

Written by ForexTraders.com on July 19, 2010 at 3:40 PM ET

NZDUSD started out the week trading higher, after making its weekly low of 0.7055 seen on Monday, the rate began rising despite the U.S. Dollar's strength against other major currencies. On Tuesday, the rate continued higher as New Zealand FPI gained by 1.3% month on month versus a previous decline of -0.7%.

On Wednesday, the Kiwi rose once more, making it seven days in a row of advances against the Greenback. The rate increased despite disappointing New Zealand Retail Sales which came out with a 0.4% increase versus an expected increase of 0.6%.

Thursday saw the rate make its weekly high of 0.7302 after the U.S. Fed's FOMC minutes gave a grim outlook for the U.S. economy and was decidedly dovish on interest rates. In addition, the New Zealand Business NZ Manufacturing Index came out at 56.2 versus a previous reading of 54.0, revised downward from 54.5.

NZDUSD ended the week giving back all of its gains made during the week on Friday as New Zealand CPI increased only 0.3% versus an expected increase of 0.5% which brought the rate down to 0.7109, up just five pips from the previous week's closing, a gain of 0.1% on the week.

Fundamental Outlook for NZDUSD

The primary market-moving economic data releases and policymaker speeches scheduled for this week in New Zealand and the United States are as follows:

New Zealand:

The upcoming week of economic data due for release in New Zealand is exceptionally quiet, with only Visitor Arrivals (1.0% m/m) and Credit Card Spending (3.4%y/y) scheduled for release on Wednesday.

United States:

The coming week of economic data releases for the United States calms down considerably this week, but still offers some interesting policymaker speeches, as well as important data for forex traders on the U.S. housing market. In terms of housing data, the calendar features Tuesday's Building Permits and Thursday's Existing Home Sales releases.

The week commences on Monday with a speech by FOMC Member Duke scheduled in Virginia, as well as the release of the NAHB Housing Market Index (16).

Tuesday has the highlighted Building Permits (0.57M) data, as well as Housing Starts (0.58M) and testimony by FOMC Member Tarullo on Financial Regulation before the Senate Banking Committee scheduled in Washington, D.C.

Wednesday offers important testimony by Federal Reserve Chairman Ben Bernanke on the semi-annual monetary policy report before the Senate Banking Committee, in Washington, D.C.

Thursday is especially active with Initial Jobless Claims (453K), the highlighted Existing Home Sales (5.15M) data, the CB Leading Index (-0.3% m/m), the HPI (-0.3% m/m), plus more testimony by Fed Chairman Bernanke on the monetary policy report, this time before the House Financial Services Committee, in Washington, D.C.

Thursday ends the week since Friday has nothing notable due out.

Technical Outlook for NZDUSD

On the technical front, NZDUSD climbed to a new recent high of 0.7302 early last week, exceeding its previous June 23rd high of 0.7158 and peaking just shy of a 100% retracement to the significant 0.7324 high last seen on April 30th. Nevertheless, the rate could not sustain these levels and fell sharply as far as 0.7097 on Friday before closing slightly higher at 0.7109, and up just 0.1% on the week overall.

The rate's short term up trend seen since the 0.6560 low of May 25th continues to support price action above a lower rising trend line at 0.6924. This rising price pattern is supported by a similar trend in the key 14-day RSI which is currently showing a neutral reading of 52, as it corrects from higher levels seen prior to Friday's sharp downward correction.

Furthermore, NZDUSD is now trading just around the level of its 200-day moving average that now comes in at 0.7117. The indicator has now flattened out after previously being positively sloping, which gives an overall neutral medium term outlook for the pair.

With the rate now at 0.7109, support for NZDUSD is now seen on the charts at 0.7025, just ahead of the psychological 0.7000 level, and then below that at 0.6885 and 0.6793. Resistance shows in the 0.7158/93 and 0.7302/24 regions, and above there at 0.7440.

Although this technical picture indicates a rather neutral medium term outlook for the pair, the shorter term picture will look correctively bullish for NZDUSD if the rate manages to exceed resistance at the levels of the 0.7320 recent high and the longer term 0.7324 high. Otherwise, consider selling rallies peaking below those resistance levels, and covering shorts ahead of rising trend line support now at 0.6924.

Figure 1: Daily candlestick chart of NZDUSD showing its 200-day MA in red, Bollinger Bands in green, Fibonacci Retracement levels in royal blue, Trend Lines in purple and the 14-day RSI in the indicator box in pale blue.