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New Zealand - Half-year Economic and fiscal update
Update along with comments from New Zealand finance minister English
English:
NZ card spending (Nov): Retail -0.1% m/m (expected +0.4%)
New Zealand card spending
NZD/USD forecast for the week of December 12, 2016
The NZD/USD pair had a slightly choppy week, as we went back and forth to form a relatively neutral candle. The market looks as if it is willing to test in the previous uptrend line, and as a result we could get a bit of a rollover. The market should find plenty of support near the 0.70 level, but also should .20 of resistance above the 0.7350 handle. Either way, it’s going to be a choppy week, and probably rest of the year. We are currently consolidating in general.
NZD/USD Weekly Forecast December 12-16
NZD/USD Extended higher within the currency recovery from late November lows in the first half of the week but was weighed by a broader Dollar recovery triggered by the latest ECB meeting on Thursday. The pair closed the week out relatively unchanged after retesting an important technical pattern. The weekly doji print shifts the near-term technical outlook to neutral following the prior two consecutive weekly gains.The ECB extended its bond purchase program to December 2017 from the prior expiry in March, albeit at a reduced pace. With the net easing commitment for 2017 substantially increased, the Dollar surged higher. The trade-weighted index ended the week out marginally higher than prior weekly highs posted in late November, to set a bullish technical tone for the Greenback.
The latest Global Dairy Trade (GDT) figures pointed to a fourth consecutive increase in auction prices. The rise was recorded at 3.5% and while there has been a recovery in the dairy sector the RBNZ retains a cautious outlook following the underperformance earlier this year. The central banks Governor Wheeler commented in a testitomny that inflation levels are expected to fall near the lower bound of the targeted range in the fourth quarter, reiterating what was said by Dr. John McDermott in October.
The relatively light economic calendar for New Zealand in the upcoming week is compensated for by the high impacting risk events scheduled out of the United States. The Federal Reserve is expected to deliver its second interest rate hike in ten years on Wednesday. The latest retail sales and PPI data will be delivered ahead of the central bank meeting and CPI data will be reported on Thursday.
Fluctuations in the Greenback may be limited as a result of the Fed meeting as the rate hike has been fully priced in. Volatility will be based on forward guidance as markets will look to Fed communication on recent developments that have led to the conviction that tightening will occur at a more rapid pace in 2017. The primary source of optimism derives from a fiscal stimulus package expected to be introduced by the Trump administration. Recent gains in inflation and a strong unemployment rate print in the latest jobs report have also added to the view of an acceleration in the path of normalization.
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Moody's on NZ: Half-year budget shows strong public finances, robust economic growth
Moody's rate New Zealand at Aaa with a stable outlook
NZ data - ANZ Consumer Confidence Index (Dec.): -2.1% m/m (prior +3.5%)
ANZ Consumer Confidence Index from New Zealand for December
ANZ's summary of the release:
NZD/USD Attempting To Break Critical Support
NZD/USD extended lower for a third consecutive daily decline, despite a correction lower in the US Dollar index (DXY). The pair has broken through support at 0.6991 on an intraday basis, but a late day recovery has threatened the break and the daily close will be important.
Support at 0.6991 is seen as critical as it has served to keep the pair higher since mid-June. An attempt at the level in late November resulted in a recovery that lasted nearly three weeks. The current attempt at the level follows a sustained break of the 200-period daily moving average as the pair sliced through the indicator and closed below it on Thursday.
The trade-weighted Dollar index turned lower from resistance at 103.54 on Thursday and has continued to decline lower in the correction today. The resistance level marks a spike low from July 2002, as seen on a monthly chart.
The weekly print for NZD/USD will set a bearish tone for the pair as the current decline, inspired by Wednesday’s Fed meeting, has erased gains from the past three weeks. The bullish engulfing weekly candle is likely to keep recovery rallies short-lived next week.
Among the majors, the Kiwi Dollar has posted the largest losses this week. The currency has posted the second largest loss on the day, falling slightly behind the Aussie Dollar.
The technical break below November lows adds to the bearish scenario and signals a continuation in the leg lower from November 8 highs.
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NZD/USD Forecast: Dairy Trends Provide Potential Support
The New Zealand dollar will remain vulnerable to further selling if the US currency continues to advance. There is, however, the risk of a sharp correction from over-bought conditions and any further increase in global dairy prices would help underpin the local currency. Overall, further short-term NZD/USD losses are liable to be reversed later in the week.
US dollar trends will remain very important following a fresh surge in US currency after the Federal Reserve interest rate increase. The US currency surged across the board, primarily due to the projections from individual FOMC members that there would potentially be three rate increases in 2017.
From above 0.7200 ahead of the decision, there was a slide to lows below 0.7000 on Friday with a drop below this level triggering a rash of stops and a dive to a trough below 0.6950, the lowest level since early June, before a slight recovery.
If the US dollar maintains a very strong tone, there will be little chance of a sustained New Zealand dollar rally while a significant correction in the US currency would increase the potential for a Kiwi rebound.
The US data releases are unlikely to have a major impact, although a strong reading for durable goods orders would help underpin confidence in the US outlook.
Comments from Fed Chair Yellen will be watched very closely in her speech on Monday. Any notable attempt to push back against the market’s hawkish interpretation of the Fed statement would undermine the US dollar and support the New Zealand currency. If Yellen appear comfortable with the market’s assessment, there is the potential for fresh US support, which would undermine the New Zealand dollar.
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Westpac McDermott Miler Q4 confidence
NZD/USD At Risk Of Collapse Following Critical Support Break
A series of technical indications for a turn lower in the medium-term NZD/USD trend have been developing over the past month. Last week’s price action resulted in a late week break of key support near the 0.7000 handle, a level that had held the pair higher since mid-June. Also, a sustained break of the 200-period daily moving average materialized as a result of last week’s decline, as well as a bearish engulfing weekly candle to erase losses from the prior three weeks.
Further adding to the bearish scenario is a break below a rising channel that had previously contained price action from the start of the year, as well as a clear succession of lower lows and lower highs from the early September peak.
While the pair may in early stages of a potential turn lower in continuation of the predominant downtrend, past price action has shown declines to be rapid while recoveries have been shallow and consolidative in nature. A clear example can be seen on a weekly chart as the recovery from August 2015 lows took about the same time as the decline from July 2014 highs, however, less than half of the decline was retraced.
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