New Zealand Consumer Confidence Index compiled by ANZ Bank came in at 119.2 vs 114.8 previous month. This represented a gain of 3.8% for April vs a 5.1% drop M/M in March. However this increase in consumer sentiment is not enough to cover loss ground from Feb’s 121.0 read. Nonetheless, a gain in consumer sentiment is always welcomed and NZD/USD traded slightly higher, pushing above 0.843, alleviating bearish pressures for now.
Price has been trading lower from the 0.85 resistance after bullish recovery from 0.838 has failed. The fall in NZD/USD is significant considering that Kiwi CPI is at 1 year high , which should increase the likelihood of RBNZ rate hike especially in the face of rising housing prices that are threatening to spiral out of control. However, 0.85 remain firm and price traded lower, finding interim support around 0.843. Price was threatening to break below the interim support until better consumer sentiment data saved the day, or at least temporarily gave bulls some hope to push higher.
However, from a technical perspective, overall sentiment is still down. Current price level is below the swing low of European Open on 16th April, and lower than the 0.845-0.848 consolidation zone found yesterday. On balance of things, it seems likely that 0.843 will be re-tested, and should it be broken, we could see price continuing current bearish momentum and straddle along the descending trendline lower.
On the daily chart, bears are emerging to be the winner for the struggle 1 day ago right in the middle of the trendline intersection. Stochastic reading is on the side of bears with readings still firmly pointing lower. 0.838 may provide some support, with a break opening up 0.828 and subsequently 0.818. There is still a possibility of false breakout though, which give the possibility of price breaking 0.848 – 0.850 resistance and straddle along the upward trendline higher.
Fundamentally, it is good to see consumer sentiments remaining bullish about New Zealand’s economic outlook. With the devastating drought appearing to be easing, production levels of New Zealand is expected to recover which will provide a strong bullish push to their exports and GDP growth. However, this would also mean that inflation risk will be higher than ever, and RBNZ will need to start planning on ways to limit inflation yet bringing down NZD/USD which Governor Wheeler himself has said is about 10% too high. Throw in Dep Gov Spencer’s threat to raise rates to bring housing inflation down, RBNZ appears to have 2 objectives that are mutually exclusive. The next rate decision will be fun to watch.
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