Nzdusd - page 17

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The NZDUSD breaks below the 0.7400 level and it could be heading to the 0.7300 zone. The 0.7300 area could become a good support for the Kiwi.

 

New Zealand house price inflation 9.3% y/y in April (prior +8.5% in March)

Real Estate Institute of New ZealandMore:

  • Prices rise 0.5% M/M
  • Auckland prices rise 1.2% M/m, 18.9% Y/Y
  • April house sales 7,234
  • Sales rise 28% Y/Y
 

AUD/NZD: The Massive Rally No One’s Talking About

The US dollar has started out today’s North American session on the back foot, hurt by comments from William Dudley, the influential President of the New York Federal Reserve. In comments during a panel discussion in Zurich, Dudley bluntly stated that he did not know when the Fed would hike rates and came off as extremely cautious about tightening policy, a sharp contrast from his previous comments that had hinted at a rate increase mid-year. Dudley went on to express his opinion that, “After more than six years at the zero lower bound, lift-off will signal a regime shift even though policy would only be slightly less accommodative… I expect that this will have implications for global capital flows, foreign exchange valuation and financial asset prices even if it is mostly anticipated when it occurs.” Dudley’s views tend to represent the powerful “core” of the FOMC and today’s comments suggest that the central bank as a whole is growing less hawkish.

While the US dollar continues to grab all the headlines, one the currency market’s biggest moves is occurring on the complete opposite side of the world. After flirting with the psychologically-significant 1.00 level in late April, AUD/NZD has rallied nearly 800 pips in the past three weeks. The move was driven by a perfect storm of monetary policy: The RBA unexpectedly shifted back to neutral after last week’s rate cut, while the RBNZ has seen a big dovish shift and is now expected to cut interest rates later this year.

AUD/NZD exploded higher as traders rushed to adjust their interest rate expectations, leaving rates at a key technical level as we go to press. From a candlestick perspective, yesterday’s price action formed a clear Bullish Marubozu* candle, showing strong buying momentum and foreshadowing today’s bullish continuation. Though the antipodean pair has broken above its 200-day MA at 1.0710, the unit is now pressing against the 61.8% Fibonacci retracement of the entire November-April, as well as the previous high from late January, around 1.0800. Not surprisingly, the MACD indicator is showing strong bullish momentum after the recent surge, but the RSI indicator has now reached overbought territory for the first time since last September, raising the probability of a near-term pullback off this resistance level.

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If Friday's candle closes bearish on the NZDUSD, then there could be a lower low on the daily chart for next week.

 

NZD/USD: Kiwi for Sale as Rate Cut Hopes Rise

New Zealand's dollar lost steam on Friday as hopes for a Reserve Bank of New Zealand (RBNZ) interest rate cut rose among currency traders, with dairy prices' 3.5% fall in the latest auction supporting the view of diminishing demand for New Zealand's key export product.

The New Zealand dollar nicknamed the kiwi among traders is trading down 0.67% at $0.7466 against its US counterpart after making a high of $0.7563 on Thursday. From the technical point of view, kiwi is trading very close to its minor support level, with a break below $0.7460 signaling further losses up to the $0.7380 level.

Kiwi is trading lower as expectations grew that the RBNZ may cut interest rates as early as next month, due to low dairy payout and weak inflation.

Fonterra, New Zealand's biggest dairy company said it expects to see smaller quantities of dairy products being put up for sale at its auction, as the offer volumes over the next 12 months have been decreased by 875MT.

Global dairy prices have already come under huge pressure over the last year and a half due to rampant supply and waning demand from China, falling some 50% lower from their peak in February last year.

Building RBNZ rate cut expectations had resulted in the New Zealand dollar's underperformance over the course of the past month as the RBNZ said that "it would be appropriate to lower the OCR if demand weakens."

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NZD/USD Forecast May 18-22

The New Zealand dollar fell sharply in a week that probably had the RBNZ smiling, but then managed to enjoy some kind of recovery. What’s next?The milk auction is the main event in a busy week . Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.

Speculation about two rate cuts coming to New Zealand now in place, with the first one coming already in June according to some market participants. NZD/USD suffered badly, even with the USD on the back foot due to estimations that the Fed rate hike is beyond the horizon. However, the excellent retail sales report from New Zealand certainly supported a recovery of the kiwi.

  1. PPI: Monday, 22:45. Producer prices are also released only once per quarter, and despite their lesser importance in comparison to CPI, they still carry weight. In Q4 2014, PPI Input dropped by 0.4% and could rise in Q1 2015. PPI Output slid by 0.1%.
  2. Inflation Expectations: Tuesday, 3:00. This quarterly survey provides a view on the future directions of inflation via a survey of consumers and complements the official CPI release. The survey, complied by the RBNZ, could give us an indication about the next move of the Bank – to cut or not to cut. In Q4 2014, inflation expectations dropped below 2% to 1.8%. Another slide now could exacerbate market expectations for a cut in June.
  3. GDT Price Index: Tuesday. The Global Dairy Trade, aka as the price of milk has a significant impact on the kiwi as dairy products are New Zealand’s main exports. The indicator, released every other week, dropped in the past 4 auctions and weighed on the kiwi. After a slide of 3.5%, a rise is still awaited.
  4. Visitor Arrivals: Wednesday, 22:45. Tourism is also a significant sector in the economy and this monthly indicator provides some insights. After a drop of 3.6% in March, the first month of autumn, we can expect stability in April.
  5. Annual Budget Release: Thursday, 2:00. The government releases its budget plans, and perhaps more importantly, it consists of updated growth and inflation forecasts. Lower growth forecasts could weigh on the kiwi, while some optimism could help stabilize it.
  6. Credit Card Spending: Thursday, 3:00. With retail sales published only once per quarter and the wide usage of credit cards, this measure provides an updated snapshot of the kiwi consumer. After a year over year rise of 5.2% in March, a slower gain is on the cards now.

source

 

The Kiwi keeps dropping, but the 0.7400 could act as a good support, even though it already tried to break it once.

 

NZ data - Q1 PPI Output -0.9% q/q & Input -1.1% q/q

New Zealand producer prices for the first quarterQ1 PPI Output -0.9% q/q

  • prior was -0.1%

    • Input q/q for Q1 -1.1% q/q

    • prior was -0.4%

    For the y/y data:

  • Output prices down 2.5% y/y, the biggest drop since Q4 2009
  • Input prices are down 4% y/y, the most since Q3 of 2009

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To the extent that the PPI gives an indication of the path of consumer-level inflation the implications are clear ... inflation is not an issue for the NZ economy.

NZD is a little lower on the data . If the Reserve Bank of New Zealand are of a mind to lower rates, it doesn't seem consumer inflation is an issue. I still reckon the RBNZ is on hold. The OIS market is close to line-ball, pricing the probability of a 25 basis point cut at 48%. The next RBNZ policy meeting is June 11.

 

Good bullish bounce on the NZDUSD from the 0.7300 level, but the 0.7400 level could act as resistance.

 

NZD/USD forecast for the week of May 25, 2015

The New Zealand dollar fell during the course of the week, testing the 0.73 level. We believe that there is a significant amount of support below though, so quite frankly we are not comfortable selling at this point. We certainly can’t buy this market though, because it is far too bearish. With that being the case, we are simply sitting on the sidelines as far as longer-term trades are concerned. However, shorter-term selling opportunities should continue to be the case going forward, so we suggest shorter time frames.

source

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