NZD news

Moderators: mntiwana, mrtools


NZD/USD Continues To Decline, Approaching Support Confluence

NZD/USD extended lower on Tuesday as Fed chair Yellen’s testimony triggered a stronger Dollar. The currency pair has posted a loss in five out of the past six sessions and trades lower by just over 3% from last week’s high.

Janet Yellen was hawkish in her testimony on the semiannual monetary policy report in Washington, focusing mostly on the risk associated with delays in the path of normalization. The Fed chair indicated that waiting too long to remove accommodation would be unwise and could potentially lead to a recession if the Fed were forced to raise rates rapidly down the road. Yellen did not provide a specific timeline for the next rate hike but stated that interest rate hikes were appropriate at upcoming meetings. There was a notable increase in rate expectations as priced in by the futures markets with the odds of a March increase jumping to 17.7% from the prior day pricing of 13.3%. There was an initial surge higher in expectations for June but odds have settled near 70% shortly after the speech, up from 65.3% priced in the prior day.

The US Dollar index (DXY) had advanced for a fourth consecutive day, boosted by US data and Yellen’s testimony. The Fed chair’s prepared statement warning of delays in raising rates caused a quick jump from 100.93 to 101.37 where a small range has formed. The index trades at fresh highs for the week and broke to three-week highs on Monday. The next major level of resistance is seen at the 61.8% Fibonacci level measured from 2001 highs to the 2008 low residing at 101.80. The level had previously held the index lower in November.

The US producer price index was reported to rise 0.6% in January coming in ahead of the analyst forecast for a rise of 0.3% and a 0.3% gain in the prior month. Excluding food and energy, the index rose 0.4% versus an expected rise of 0.2%. The data triggered an initial move lower in NZD/USD but losses as a result of the data were not sustained.
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NZD/USD Reverses Sharply To Wipe Out Early Week Losses

Losses in NZD/USD following US data on Wednesday were short-lived as a reversal quickly erased the data-driven decline and took the pair to new highs for the week. The rally in the currency pair has served to erase losses from the prior two-day decline to take the exchange rate back into positive territory for the week.

The US consumer price index was reported to rise 0.6% in January, marking the largest gain in three years. Analysts were looking for a 0.3% gain and a rise of 0.3% was reported in the prior month. Core CPI rose 0.3% versus an expected rise of 0.2% and a gain of 0.2% in December.

Retail sales, released simultaneously, came in much stronger than expected. There was a rise of 0.4% in January against an expected gain of 0.1%. December sales were revised up to 1.0% from the previously reported rise of 0.6%. The core figure rose 0.8% to beat the consensus for a 0.4% gain.

The data triggered a sharp drop in the exchange rate to post today’s low of 0.7146. The pair reversed within less than thirty minutes of the release and wiped out losses within an hour of the US economic reports.

Fed chair Yellen gave her second testimony to Congress this week. When asked about tapering the asset purchase program she stated that the Fed will want to see interest rates higher prior to shrinking its balance sheet. A higher interest rate would allow the bank more flexibility in the event there was a need to ease policy down the road. Similar to Tuesday’s testimony, Yellen admitted that growth was dissappointing but defended the Fed by stating that the US economy recovered remarkably as compared to the European Union.
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NZ Q4 Retail Sales (excl. inflation): +0.8% q/q (vs. expected +1.0%)

  • Up 0.8% q/q, a miss on expected of +1.0%. The prior revised to +0.8%, from  +0.9%

  • For the y/y up 4.2%

From StatsNZ:
  • Eleven of the 15 industries had higher sales volumes this quarter
The largest increases in:
  • motor-vehicle and parts retailing - up 1.9 percent
  • pharmaceutical and other store-based retailing - up 2.5 percent
  • accommodation - up 3.5 percent
  • electrical and electronic goods - up 2.0 percent.


New Zealand services PMI (January): 59.5 (prior 58.4)
The BNZ - BusinessNZ Performance of Services Index (PSI)

For January, comes in at 59.5
  • December was 58.4
Comment from BusinessNZ chief executive Kirk Hope:
  • Increased activity in the services sector was across the board
  • "While activity/sales (60.8) remained above the 60-point mark, new business/orders reached its highest level since January 2014, which should flow through to overall activity over the coming months"


New Zealand Producer Inflation: Output Index Strengthens in Q4

Producer prices in New Zealand rose faster than expected in the fourth quarter, a sign the central bank’s highly accommodative policies were beginning to translate into stronger inflation.

Prices paid by producers rose 1% in the fourth quarter, following a 1.5% gain in July-September, the national statistics bureau reported Monday. Prices received by producers accelerated 1.5% following a 1% gain the previous quarter. Economists in a median estimate forecast the input index to rise 0.9% and the output gauge to climb 0.6%.

In annual terms, the input producer price index (PPI) rose 2.3%, while the output PPI climbed 2.5%.

The PPI input index tracks price changes of goods purchased by manufacturers, whereas the output index captures price changes of goods sold. Like the consumer price index, the government’s official PPI measures are released quarterly.

The Reserve Bank of New Zealand (RBNZ) kept interest rates at 1.75% earlier this month, maintaining that interest rates will remain highly accommodative for a considerable period in support of economic growth and inflation. However, analysts believe the Reserve Bank could be on course to raise interest rates early next year on account of a stronger domestic economy.


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NZD/USD forecast for the week of February 27, 2017, Technical Analysis

The NZD/USD pair went back and forth during the week, showing a significant amount of volatility. The 50% Fibonacci retracement level has offered support just below though, so I think given enough time we will break out to the upside and reach towards the 0.7350 level. Ultimately, I believe that it’s probably easier to trade this market off the short-term charts, but recognize that the longer-term charts will dictate which direction we go. Ultimately, I believe that this market will make a significant move the right now we are simply trying to build up the necessary inertia.




NZD/USD Struggles To Sustain A Rally

Price action in NZD/USD was similar to Monday as a decline following the European close has erased most of an early day recovery. The currency pair turned slightly ahead of resistance, driven by strength in the greenback and was last seen trading at 0.7201 for a 11 point gain on the day after touching a high of 0.7237 earlier today.

The rally stopped short of testing resistance at 0.7238 prior to reversing lower. The level marks the high set during the December Fed meeting and has triggered a turn lower on two attempts over the past two weeks. The currency pair did manage to break above Monday’s high prior to turning, likely triggering some stop losses prior to the reversal.

The US dollar index has been confined to a range since the weekly open. Range resistance is found at 100.25 and declines have been capped around 100.80. The range in the index has been narrowing but a breakout appears imminent as President Trump is scheduled to speak to Congress at 21:00 EST today, likely to cause volatility in the markets.

The second release of US GDP was reported softer than expected at a pace of 1.9% for the December quarter of 2016. The data triggered a spike higher in NZD/USD but the 15-minute candle following release closed relatively unchanged. The Conference Board reported consumer confidence at 114.8 in February, reflecting the best reading in 15 years.
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RBNZ Wheeler: Interest Rate Risks Equally Balanced

In a speech on Wednesday, Reserve Bank of New Zealand (RBNZ) Governor Wheeler stated that the risks around future Official Cash Rate (OCR) movements are equally weighted reflecting balanced risks around inflation.

In effect, there is an equal probability that the next OCR adjustment could be up or down and if the economy develops in line with the bank’s economic projections, the OCR would remain at the current level over the next two years.

According to Wheeler, the RBNZ considers the balance of risks to be on the downside with several major sources of uncertainty surrounding Europe, the US and China. In the bank’s view, the biggest uncertainty relates to the US ‘America First’ platform with concerns over any move to protectionism which could damage the global economy.

From the bank’s perspective, there is some potential upside for the domestic economy if migration and commodity prices turn out to be stronger than forecast.

The biggest domestic risks remains around the housing market with the RBNZ welcoming a moderation in housing-sector inflation, but warning that it was too early to say whether this trend would continue.

The RBNZ also warned that another risk is for the exchange rate to remain higher than projected by the bank and the possibility that monetary policy might need to be eased to offset the impact of the strong currency.
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New Zealand - Value of all building work for Q4: +1.9% q/q(expected +1.5%)

New Zealand - Value of all building work for Q4  +1.9% q/q, a beat

  • expected +1.5%, prior +1.4%
Residential building work +1.1 percent (the smallest increase in six quarters)
Non-residential building +3.0 percent

The New Zealand dollar collapsed during the week, slicing all the way down to the 0.70 level underneath. This is a large, round, psychologically significant number of course, so it will be interesting to see how we react from here. If we break down below here, the 50% Fibonacci retracement level will more than likely be targeted. Alternately, I could make an argument for enough support here to turn things around but I think you’re probably best leaving this pair alone currently, as it needs to deal with this large, round, psychologically significant barrier.


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