NZD looks to weaken

17 February, 2017

The New Zealand dollar has found itself under pressure in recent days as the market has started to hedge a little while it waits on the next steps for the US economy. Trumps term has seen large speculation around fiscal stimulus and tax changes, which so far have not materialised and in turn the market looks to be taking a breather and nowhere is this more apparent than with commodity currencies. The New Zealand dollar has so far tried to bounce back in recent days but has not been helped by the RBNZ putting out headlines that it believes upward pressure is weakening, and also today's drop in retail sales q/q to 0.8% (1.0% exp) has pushed back on the market. It seems unlikely that the RBNZ will even consider looking to move rates any higher until it hits the inflation target of 2.0% and that is certainly some time off at this stage.

For the NZDUSD on the charts the trend has always been your friend, but it's lost a lot of momentum over the past week with the NZDUSD dipping through the 20 day moving average before finding some support around 0.7167. From here the bulls have tried to wrestle back some control to push the NZDUSD higher but the push upwards came up short of the 20 day moving average and resistance at 0.7238. Unless we see any further momentum here we could see some strong waves lower on the chart, but the 50 day and 100 day moving average will likely act as dynamic support and it will be interesting to see what levels it looks to respect.

Recently I touched on gold as well in the current market climate and it's continued role in the current market environment. Certainly with some investors slightly worried about the political turmoil gold seems like a safe bet and an easy one for when the markets are spooked, and investors so far have more than taking a liking to it. The rise has also been lead in part by the weakening of the USD - despite the recent positive unemployment claims figure of 239K (245K exp). With further turmoil likely to occur the Trump administration announces its fiscal and tax plans, there is a possibility we could see further gains for gold.

Resistance has so far held back the advances of gold with a strong level forming around 1245.50 which has so far defeated the majority of bullish movements. Further drops lower for gold have been aggressively defended at the 20 day moving average, showcasing a strong willingness for the bulls to keep the precious metal in play. With the 20 day moving average still pushing higher we could see consolidation followed by a break out to the next level at 1262.18. However entry points are likely only to be found on key levels as the market seems very prone to pivoting.

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