Weekly Recap and Outlook for NZDUSD - 8/02/2010
NZDUSD began the week on a firm note in spite of the favorable U.S. New Home Sales data that came out on Monday. On Tuesday, the pair made its weekly high of 0.7394 - a level not seen since January - before selling off ahead of the release of NBNZ Business Confidence which came out at 27.9, considerably lower than the previous reading of 40.2.
The pair continued selling off on Wednesday, but managed to stay above the 0.7250 level. Also on Wednesday, the RBNZ raised its benchmark Official Cash Rate by 25 basis points to 3.00%, as was widely expected. RBNZ Governor Bollard stated after the release that, "the pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement. Our policy assessment will be continually reviewed in light of economic and financial market developments." The Kiwi then dropped precipitously after that announcement was made as the market cut back on its expectations for future RBNZ rate hikes. Also on Wednesday, the New Zealand Trade Balance narrowed to 276M from the previous 768M, which was revised downwards from 861M. This was somewhat worse than the 359M expected.
The rate continued its decline into Thursday which saw NZDUSD trade down as low as 0.7200. New Zealand Building Consents out on Thursday had increased by 3.5% month on month, which was considerably better than the previous decline of -9.5%. NZDUSD then made its weekly low of 0.7190 on Friday before trading somewhat higher to close the week at 0.7254, showing an overall loss of 0.2%. The Kiwi was the only major currency that fell against the Greenback last 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:
The upcoming week of economic data due for release in New Zealand is again quite quiet, but it does feature the important New Zealand Employment report scheduled for Thursday.
Monday starts the week with the release of ANZ Commodity Prices (last -1.2%). Tuesday offers the important Labor Cost Index (0.4% q/q), and Wednesday has nothing of note scheduled for release.
Thursday should be the weekly highlight with the New Zealand Employment Report due for release in which the Employment Change (0.5% q/q) and the New Zealand Unemployment Rate (6.2%) will be closely watched.
This ends the week since Friday is quiet.
The coming week of economic data releases for the United States heats up considerably versus the previous week, and offers some interesting data for forex traders on the U.S. economy. The U.S. economic calendar features the very important U.S. Employment Data due out on Friday.
Monday starts the week off with ISM Manufacturing PMI (54.3), Construction Spending (-0.4% m/m) and ISM Manufacturing Prices (55.3), as well as speeches by Federal Reserve Chairman Bernanke in Charleston and FOMC Member Tim Geithner in New York.
Tuesday offers the Core PCE Price Index (0.2% m/m), Personal Spending (0.1% m/m), Personal Income (0.2% m/m), Pending Home Sales (0.9% m/m), Factory Orders (0.0% m/m) and Total Vehicle Sales (11.6M).
Wednesday starts the employment data releases with Challenger Job Cuts (last -47.1% y/y) and the ADP Non-Farm Employment Change (36K), plus other data including ISM Non-Manufacturing PMI (53.3).
Thursday just has Initial Jobless Claims (456K), while Friday is the weekly highlight, featuring the very important Non-Farm Payrolls Change (-75K), the U.S. Unemployment Rate (9.6%), Average Hourly Earnings (0.1% m/m), Consumer Credit (-5.4B m/m). That ends the week.
Technical Outlook for NZDUSD
On the technical front, despite showing initial strength early last week that took NZDUSD to a new recent high at 0.7394, the rate then traded sharply softer. It bottomed out at 0.7190 before bouncing slightly to close the week at 0.7254, down -0.2% overall. In making its weekly high at 0.7394, the rate just exceeded the 100% retracement level of the down move from 0.7322 down to 0.6560 at 0.7322, but was rebuffed ahead of important resistance seen at 0.7440.
The rate's short term up channel seen since the 0.6560 low of May 25th continues to support price action above its lower rising trend line now drawn at 0.7071 and below its upper trend line now around 0.7455. Furthermore, this overall rising price pattern had been supported by a similar trend in the key 14-day RSI indicator, that currently has a reading in the central part of neutral territory at 56. Nevertheless, the most recent high at 0.7394 seen last week failed to make a new high on that RSI, thereby indicating bearish regular divergence for NZDUSD.
With that noted, the rate again closed last week above the level of its 200-day Moving Average that now comes in at 0.7108. The indicator is now very slightly downward sloping after previously being positively sloping. This gives an overall neutral medium term outlook for the pair.
NZDUSD closed on Friday at 0.7254, and support for NZDUSD is now seen on the charts at 0.7190/0.7232, 0.7095 and 0.7027, just ahead of the psychological 0.7000 level. Resistance shows up in the 0.7285/0.7324 region, at 0.7394 and at 0.7440.
This technical picture indicates a rather neutral medium term outlook for the pair, and the shorter term picture that has been looking correctively bullish for NZDUSD is now showing signs of a coming downswing or consolidation that may suggest taking profits on long positions. The recent near term up trend would be neutralized if the rate manages to sustain a fall below rising channel support now at 0.7071.
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.
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