New Zealand’s trade balance surprised to the upside in July as it rose to NZ$85m, while economists expected a deficit of NZ$200. This is the first time since 2012 that the country reports a trade surplus for the month of July. The good news came on the back of an unexpected increase in dairy exports, which jumped 51% to NZ$1.27bn. Overall, exports rose 17%y/y or NZ$668 million to reach NZ$4.63 billion. Imports were up NZ$232 (+5.4%y/y) amid sharp increase in vehicles, part and accessories imports (+15%y/y).
The unexpected surged in exports is particularly surprising as the Kiwie has been appreciating substantially since the beginning and reached 0.7558 at the end of July, its highest level against the greenback since May 2015.
In the FX market, the lack of reaction by traders showed that the rally that send NZD/USD to 0.72 wasn’t driven by local economic developments but rather by the investors’ appetite for higher yields. Indeed, both the Kiwi and the Aussie were in high during the summer month as the Federal Reserve prolonged the suspense about the future of its monetary policy.
Over the last three weeks, NZD/USD has broken several supports and is currently testing the key 0.7188 level (Fibonacci 50% on May-July rally). If broken the following one stands at 0.71 (Fibo 61.8% and psychological level), while on the upside a resistance lies at around 0.7330 (50-day MA). We remain bearish Kiwie - and Aussie- as we expect investors will slowly start to reload long USD position ahead of September FOMC meeting.
By Arnaud Masset