New Zealand started today with a bang. Overnight risk currencies such as NZD and AUD were already trading higher due to Bernanke’s dovishness, which drove US Stocks and Asian Stock higher. Prices stagnated after that, but NZD/USD had its afterburners on, in the form of ANZ Business Confidence and Activities Outlook data, both of which managed to surpass Jan’s reading greatly. Business Confidence for Feb came in at 39.4, a large jump from 22.7 which Activity Outlook had a more modest increase of 6.2, bringing last months reading of 31.4 to this month’s 37.6.
The additional boost allowed NZD/USD to enter deep into the Kumo, which was acting as a resistance post Bernanke’s speech. However price found similar difficulty on the other side of the Kumo, which is also the confluence of support turned resistance around 0.832. Stochastic readings is also hinting of forming a peak, which adds strength to the current resistance and downside pressure if price does rebound from here. The bullish kumo twist that has just been formed hours ago suggest that we could be on our way to a fresh uptrend if price does manage to break higher from here, and that may continue to give bulls hope to hold onto their positions for now.
Daily Chart is less optimistic for the bulls though, wit Kumo acting are resistance against rallies. Also, if price failed to break into the Kumo and ended up trading lower, this can be constructed to be the confirmation of bearish breakout from 0.835, and at the same time affirming what the Bearish Kumo Twist tell us.
Fundamentally, NZD/USD is caught between 2 strong headwinds. On one hand we have NZD weakening pressure due to a dovish RBNZ, on the other hand we have USD weakening due to the recovery of risk appetite. Previously NZD/USD bearish momentum could be sustained due to risk aversion coming in line with dovish RBNZ. This time one, the conflicting factors will hamper strong follow-through on either side. However, if smaller news such as today continue to point to stronger Kiwi economy, we could see RBNZ changing their stance which will help a longer-term bullish tone for NZD/USD.
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