NZD/USD – Limited Movement in Thin Holiday Trade

The New Zealand dollar has posted slight losses on Monday, as NZD/USD is trading at 0.6440 in the North American session. In economic news, it’s a quiet start to the new trading week, with no releases on the calendar. The US markets are closed for Martin Luther King Day, so NZD/USD will likely remain subdued during the day. The markets are keeping a close eye on New Zealand GDT Price Index, a key indicator which can have a sharp impact on the movement of NZD/USD.

In the US, last week ended on a mixed note. Core Retail Sales and Retail Sales both posted declines of 0.1%, pointing to weakness in consumer spending, a key driver of economic growth. At the same time, consumer confidence remains at high levels, as the UoM Consumer Sentiment jumped to 93.3 points, beating the estimate and posting a six-month high as well. Inflation levels, one of the sore points in a generally bright economic picture, continue to struggle. PPI, which measures inflation in the manufacturing sector, came in at -0.2%, matching expectations. Still, this marked the third decline in four months, and persistently weak inflation could delay the next Fed rate hike. There was more bad news from the manufacturing front, another trouble spot in the economy. The Empire State Manufacturing Index plunged to -19.4 points, compared to an estimate of -4.1 points.

Is the Federal Reserve planning another rate hike? The Fed raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. A rate hike in late January is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against the December rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.

There hasn’t been much for the New Zealand dollar to cheer about in the New Year, as NZD/USD has plunged about 300 points in January. The kiwi joins other minor currencies, such as the Australian and Canadian dollars, which have experienced sharp drops following recent events in China, notably the Chinese stock market meltdown and the devaluation of the Chinese yuan. Geopolitical tensions in Korea, the Persian Gulf and Indonesia have also contributed to significant movement away from the risky New Zealand currency, bolstering the US dollar early in 2016.

NZD/USD Fundamentals

Monday (Jan. 18)

• There are no scheduled New Zealand or US releases

Tuesday (Jan. 19)

• Tentative – New Zealand GDT Price Index

*Key releases are highlighted in bold

*All release times are EST

NZD/USD for Monday, January 18, 2016

NZD/USD January 18 at 9:35 GMT

Open: 0.6441 Low: 0.6428 High: 0.6480 Close: 0.6444

NZD/USD Technical

• NZD/USD posted small gains in the Asian session. The pair has been flat in the European session.
• 0.6368 is providing support
• 0.6449 is a weak resistance line
• Current range: 0.6368 to 0.6449

Further levels in both directions:

• Below: 0.6368, 0.6233 and 0.6152
• Above: 0.6449, 0.6605, 0.6738 and 0.6897

OANDA’s Open Positions Ratio

In the NZD/USD, short positions have a majority of positions (60%). This is indicative of trader bias towards the pair moving 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.