Kiwi struggles after weak trade data

21 December, 2016

The New Zealand dollar continues to be volatile for traders despite the upbeat rhetoric from the government of New Zealand and also the Reserve Bank of New Zealand. Trade Balance data today was anything but positive though as it came in at -705M (-500M exp), putting further pressure on the NZDUSD which has been under intense pressure from bears in the recent weeks. This combined with the recent drop in global dairy auctions will put pressure back on the New Zealand economy, and it will be interesting to see the view point of the Reserve Bank of New Zealand regarding this as trade balance has always been high on its agenda. However, there has been some slight wins as the housing market looks to be cooling off after enacting aggressive measures and the NZDUSD has started losing some of its value which will certainly help turn around further trade balance issues.  The key focus from here will be tomorrows GDP data, with many expecting it to be a robust figure for the quarter - despite the recent natural and market events which have caused some worries.

The NZDUSD continues to be an interesting trade with long trending runs and also large patches of ranging, but so far it has been all trend with no range as of late - a common theme across all commodity currencies since the Trump victory. The trade balance data today had little effect on the NZDUSD and the markets seemed to be positive to it; it's the USD strength though which is causing issues for commodity currency bulls. Support was certainly found at 0.6881 and traders will be looking to see if the daily candle closes out as a hammer which could indicate a swing here as USD traders may be looking to take a breather and unwind. If that is the case then resistance can be found at 0.6948 and 0.7000 as the next levels higher, however this is against the trend at present and I would expect fierce pressure around these levels from kiwi traders.

Across the 'ditch' and the Australian dollar continues to find itself under some pressure as well against the USD, but one trade that has been quite interesting has been the trading around the AUDJPY after yesterdays Bank of Japan holding fire. Recently, the AUDJPY trended up sharply before hitting and forming a strong trend line on the daily chart which is quite bearish in nature since 2014. The clear respect of this trend line will be key for a number of traders strategies, and as the Yen continues to look to get weaker the AUDJPY may see another attempt to take a higher level here.

The move higher on the daily chart as of today shows a strong candle trying to engulf all the recent loses after finding support at 84.754, and I would expect a further rise to also find resistance at 86.188 before looking to play of the trend line yet again. 

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