NZDUSD is about to run a gauntlet of data and central bankers

5 May, 2015

NZDUSD has been in a broad upward trend for most of the year, but it still hasn’t retraced a massive sell-off in January. At that time a combination of NZ dollar weakness and US dollar strength driven by a divergence of monetary policy expectations between the respective economies crippled NZDUSD. The totality of the sell-off was a staggering 1,000+ pips to its lowest point, all in under a month. The pair has spent the preceding months attempting to regain this lost ground but the rally has been gradually losing momentum.

The kiwi was mostly rebuilt on the premise of tighter monetary policy in NZ and some intermittent dollar weakness. While the latter situation may continue, the former foundation is looking very shaky. The RBNZ has adopted an outright dovish bias and continues to verbally assault the NZ dollar at every opportunity, both of which are heavy burdens for the kiwi to carry.

The possibility of looser monetary policy hinges on NZ economic data and the strength of the kiwi. At last week’s meeting governor Wheeler stated that “the timing of future adjustments in the OCR will depend on how inflationary pressures evolve in both the non-traded and traded sectors. It would be appropriate to lower the OCR if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.” This places the RBNZ firmly in wait-and-see mode and leaves the rates outlook in NZ even more susceptible, both to the upside and the downside, to softer than expected NZ economic data than it already was.

NZ’s all-important employment and dairy numbers

NZ’s Q1 employment report is due out tomorrow at 2245GMT. Employment is expected to have increased an encouraging 0.8% last quarter, after jumping an even more impressive 1.2% in the prior quarter, which should help bring the employment rate down to 5.5% - it’s worth noting that the participation rate for Q4 has been revised down to 69.4% from 69.7% and it’s not expected to have changed in Q1. If all goes to plan this employment report may keep NZD bears at bay for a little longer. In saying that, a softer than expected employment report would provide kiwi bears with another reason to maul the currency, especially considering that NZ’s labour market has been a saving grace for NZD bulls.

The commodity-backed kiwi will also be subjected to the results from GlobalDairyTrade’s latest dairy auction. The last three auctions (two in April and one in March) have seen prices fall and another soft result wouldn’t bode well for NZD. The kiwi’s recovery in March was partly due to consistent strong GDT auction results, which leaves it very vulnerable to deteriorating prices.

On the US dollar side of the equation, there’s a lot of important economic data out of the US this week which could impact the outlook for interest rates (all times are AEST):

• March trade numbers – exp. -$41.7bn (Tuesday 2345)

• ISM April Non-Manufacturing PMI – exp. 56.2 (Wednesday 0000)

• ADP April employment change – exp. 200K (Wednesday 2215)

• Initial jobless claims – exp. 278K (Thursday 2230)

• April NFP – exp. 230K (Friday 2230)

• Unemployment rate – exp. 5.4% (Friday 2230)

The rest of the gauntlet for NZDUSD will comprise of numerous speeches from central bankers from both sides of pacific. RBNZ Governor Wheeler is due to speak in Nelson on Thursday at 1000AEST, but as is the case with many RBNZ speeches this one isn’t public, yet it’s worth keeping an eye on the wires at this time just in case. In the US, Fed speakers come out in force on Wednesday night/Thursday morning, with Yellen, George and Lockhart all speaking during this time (Yellen’s speech at 2315AEST on Wednesday in Washington is going to be closely watched by the market).

Technical look: NZDUSD

NZDUSD remains in its long-term upward trend, but it appears to be losing momentum – there’s a bearish crossover in daily MACD. It’ll be interesting to see if it can break through its current upward wedge formation, which would be a bearish development. If support holds we may see it make another run for 0.7750, but if it breaks price may make easy work of a support zone around 0.7500.


Source link  
Markets turn focus towards Trump address to Congress

On the evening of Tuesday, February 28th, US President Trump is slated to give a major address to a joint session of Congress in lieu of the usual State of the Union address...

FOMC meeting minutes signal rate hike fairly soon – dollar unimpressed

The minutes from the most recent FOMC meeting three weeks ago – the first such meeting since Donald Trump’s presidential inauguration – were released on Wednesday afternoon...

Crude oil look set to resume bullish trend

Oil prices have been coiling for several weeks now with both contracts spending most of their time in a tight four dollar range...


US stocks could rise 6-7% further before potential crash

The US stock markets hit repeated new record highs last week. The positive sentiment has continued at the start of this week, with Asian and European markets drifting higher in an otherwise quiet day. US index futures point to further gains at the open later on...

Fed gives little indication of interest rate trajectory

The Federal Open Market Committee (FOMC) meeting has come and gone, and little has changed in the financial markets as a direct consequence. In unanimously deciding to keep interest rates unchanged, as widely expected...

Surging equities at risk ahead of earnings season

While earnings season has started on a very positive footing, however, banks and other financial companies were already expected to shine more than others due to rising interest rate expectations. As non-financial companies begin to report in the coming weeks...


Gold rebound heading for major resistance

For more than two weeks, the price of gold has been in a strong rebound from its late-December bottom around the $1125 level. This rebound follows a sustained drop in price that began from the July highs around $1375 and followed-through to the December lows...

Crude oil at higher plateau ahead of US inventory data

Crude oil prices have recently been lifted to year-to-date highs on a successful agreement to cut oil production and control supply among major OPEC and non-OPEC oil producers...

Gold rebounds off key level ahead of busy week

As we reported the possibility on Friday of last week, gold did indeed fall further lower this week. The rising dollar, yields and US equity prices all weighed on the appeal of the buck-denominated, noninterest-bearing and perceived safe-haven precious metal...

  


Share: