NZDUSD saw volatile trading week last week, initially starting the week out on a soft note after news broke that the New Zealand Trade Balance came out showing a deficit of -186M. This was worse than the anticipated deficit of -28M by a multiple of seven. Furthermore, the former number saw a downward revision from a surplus of +276M to a reduced surplus of just +214M. Last Monday also saw released the NBNZ Business Confidence survey that came out at the 16.4 level, and considerably below the preceding reading seen of 27.9.

NZDUSD continued to see selling pressure on Tuesday and eventually fell to its weekly low point of 0.6962 after news came out that New Zealand Business Consents had risen by only 3.1% compared with the number's previous reading of 3.3% that was also downwardly revised from 3.5%.

The pair then commenced a sharp rally on Wednesday after the price of gold approached its all time high and in spite of news that ANZ Commodity Prices had fallen by -1.4% for the month against its previous level that showed a lower drop of -0.8%.

NZDUSD continued its rally on Thursday and even into Friday. The rate eventually made its weekly high point at the 0.7214 level before it ended the week a touch lower at 0.7205, showing an overall gain of 1.2% for 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 to be released in New Zealand once again has somewhat little to offer with respect to important numbers. Nevertheless, the week's numbers do include the release of the Overseas Trade Index due out on Friday.

Monday and Tuesday have nothing notable due out, so Wednesday starts the quiet week out with the release of New Zealand Manufacturing Sales (last 0.9% q/q).

Thursday also has nothing of note due out, and Friday ends the week with the release of the highlighted Overseas Trade Index (2.3% q/q) number.

United States:

The calendar of economic data coming up for release in the United States calms down significantly for the upcoming week, but it will still offer some significant information for the forex market to digest. With respect to data, the coming week will feature the important U.S. Trade Balance number due for release on Thursday.

Monday begins the week on a quiet note as the United States observes its Labor Day Bank Holiday, and Tuesday is similarly quiet.

As a result, Wednesday begins the week with the scheduled release of the important Federal Reserve Beige Book, in addition to Consumer Credit (-4.5B m/m).

Thursday should provide the weekly highlight with the release of the U.S. Trade Balance (-47.4B), in addition to the significant Initial Jobless Claims number (470K).

Friday finishes the relatively quiet week, with only the release of Wholesale Inventories (0.4% m/m) scheduled.

Technical Outlook for NZDUSD

On the technical front, NZDUSD came off to the 0.6962 level in early trading last week before then staging a sharp rally up to the 0.7214 level. The rate eventually closed the week a tad lower at 0.7205 and showing an overall gain of 1.2% versus the previous weekly close.

The price action seen last week remained above an upward sloping trend line that can now be drawn at the 0.6990 level that also goes through the important 0.6571 low point seen back on June 8^th. Nevertheless, NZDUSD sustained its recent losses below the rate's previous rising trend line that is now drawn at 0.7377 and which should cap gains for the downside scenario to prevail.

Also, NZDUSD now seems to have finished retracing its upward move from 0.6560 to 0.7394 in the move down to 0.6945 that completed on August 25^th. The rate has now already broken back above its 23.6% retracement level at 0.7197 and is therefore now targeting the original 0% retracement level at 0.7394.

Furthermore, the most recent upside price action in NZDUSD has been confirmed by higher readings on the key 14-day RSI indicator, thereby supporting the possibility of further upward moves for the rate. The key indicator currently has a reading in the upper central part of neutral territory at 56 that should not present an impediment to a move in either direction.

In addition, while trading below it most of the previous week, NZDUSD convincingly rose and closed above the level of its 200-day Moving Average last week. The key indicator now comes in at 0.7081 and remains very slightly downward sloping after previously being positively sloping. This gives a neutral medium term outlook for the pair.

NZDUSD closed last Friday at 0.7205, and support for NZDUSD can now be seen on the charts in the 0.7120/75 and the 0.6945/0.7000 congestion regions - the latter being right around the key psychological 0.7000 level - as well as at 0.6885. Resistance shows up at 0.7214, at 0.7264 and in the 0.7341/94 region.

This technical scenario tends to indicate a neutral medium term outlook for NZDUSD, although the shorter term picture would suggest seeking to trade from the long side for a possible test of the 0% retracement level at 0.7394 provided that the 23.6% retracement level at 0.7197 supports price action.

Note: Past performance is not indicative of future results.

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.