NZD/USD – GDT Price Index Drops, Kiwi Slide Continues

NZD/USD continues to lose ground on Wednesday, as the pair trades at 0.6640 in the European session. In economic news, there are no New Zealand releases on the schedule. On Tuesday, the GDP Price Index disappointed with a decline of 1.6%. In the US, ADP Nonfarm Payrolls was outstanding, posting a gain of 257 thousand. There was more good news from the US Trade Balance, which beat the estimate. Later in the day, we’ll get a look at ISM Non-Manufacturing PMI.

The New Zealand dollar has headed south early in the New Year, losing almost 200 points this week. NZD/USD has mimicked the movement of AUD/USD, which has also suffered sharp losses this week. Why are investors snapping up the safe-haven US dollar? Firstly, the appetite for risk by investors has decreased, following the release of weak Chinese manufacturing data, which has underscored the slowdown affecting the world’s second largest economy. Chinese Caixin Manufacturing PMI softened in December, as the key indicator slipped to 48.2 points in December, short of the forecast of 48.9 points. The PMI broke above the 50-point level only once in all of 2015, pointing to ongoing contraction in the Chinese manufacturing sector, another indication that the slowdown in China continues, which is bad news for minor currencies such as the New Zealand dollar. Making matters worse, another crisis in the volatile Middle East may be brewing between two major oil producers, as Saudi Arabia abruptly cut off relations with Iran following a violent protest which damaged the Saudi Arabian embassy in Tehran.

The Federal Reserve will again find itself on center stage on Wednesday, with the release of the minutes of the momentous December policy meeting. At that meeting, the Fed opted to raise interest rates for the first time in over nine years, by 0.25 percent. The Fed has hinted that the December move will kick-off a series of incremental hikes in 2016, and the markets will be looking for confirmation, or at least a hint that this is the Fed’s monetary strategy. Meanwhile, employment data started off 2016 in style, jumping to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. The markets will thus have plenty of data to sift through during the day, so we could see some further movement in the currency markets during the North American session.

NZD/USD Fundamentals

Tuesday (Jan. 5)

• 14:07 New Zealand GDT Price Index. Actual -1.6%

Wednesday (Jan. 6)

• 13:15 US ADP Non-Farm Employment Change. Estimate 193K. Actual 257K
• 13:30 US Trade Balance. Estimate -44.0B. Actual -42.4B
• 14:45 US Final Services PMI. Estimate 55.1 points
• 15:00 US ISM Non-Manufacturing PMI. Estimate 56.0 points
• 15:00 US Factory Orders. Estimate -0.2%
• 15:30 US Crude Oil Inventories. Estimate 0.7M
• 19:00 US FOMC Meeting Minutes

*Key releases are highlighted in bold

*All release times are GMT

NZD/USD for Wednesday, January 6, 2016

NZD/USD January 6 at 14:15 GMT

NZD/USD 0.6637 H: 0.6700 L: 0.6625

NZD/USD Technical

• NZD/USD posted sharp losses in the Asian session and has been choppy in European trade.
• 0.6738 has switched to a resistance role as the pair continues to lose ground
• 0.6605 is providing weak support
• Current range: 0.6605 to 0.6738

Further levels in both directions:

• Below: 0.6605, 0.6449 and 0.6368
• Above: 0.6738, 0.6897, 0.70, and 0.7128

OANDA’s Open Positions Ratio

NZD/USD ratio is unchanged, despite sharp losses by the pair. The ratio is showing a majority of short positions (55%). This is indicative of trader bias towards the pair continuing to move to lower levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.