NZD/USD – Kiwi Edges Higher, NZ Dairy Auction Next

NZD/USD has posted small gains on Tuesday, continuing the slight gains which marked the Monday session. Early in the North American session, the pair is trading at the 0.68 line. On the release front, New Zealand Inflation Expectations posted a gain of 1.6% in the first quarter. Later in the day, New Zealand releases GDT Price Index and the PPI Input. In the US, Core CPI posted a small gain of 0.2%, while CPI improved to 0.4%. Both readings were within expectations. Building Permits came in at 1.12 million, very close to the forecast. On Wednesday, the Federal Reserve releases the minutes of its April policy meeting.

The RBNZ has sent the message that it is prepared to lower rates if inflation levels don’t improve, so New Zealand inflation numbers will be under the market microscope. On Monday, Inflation Expectations posted a gain of 1.6% in the first quarter. We’ll get a look at New Zealand manufacturing inflation numbers later on Tuesday, with the markets expecting modest gains. Inflation is currently running at 0.4%, well short of the Bank’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns about the housing market. Housing prices continue to rise in Auckland, home to one-third of the country’s population, and lower rates could overheat the housing market and have negative repercussions on the economy.

The Federal Reserve, never far from the financial headlines, will take over center stage on Wednesday with the release of the April minutes. The Fed has sent out the message that a June hike is on the table, but the markets remain skeptical, following the soft Nonfarm Payrolls report earlier this month and Tuesday’s weak consumer inflation reports. With the economy showing mixed employment numbers and inflation stuck at low levels, a June hike would be nothing less than a shock, a reason in itself for the Fed to remain on the sidelines and avoid causing market turbulence. The markets are clearly expecting rates to remain at the current level of 0.25%, with the implied probability of a hike down to just 4%.

The US economy remains generally solid and last week wrapped up on a high note, as retail sales and consumer confidence reports beat expectations. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points.

NZD/USD Fundamentals

Monday (May 16)

  • 23:00 New Zealand Inflation Expectations. Actual 1.6%

Upcoming Key Events

Tuesday (May 17)

  • 8:30 US Building Permits. Estimate 1.13M. Actual 1.12M
  • 8:30 US CPI. Estimate 0.3%. Actual 0.4%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
  • 8:30 US Housing Starts. Estimate 1.12M. Actual 1.17M
  • 9:15 US Capacity Utilization Rate. Estimate 75.1%. Actual 75.4%
  • 9:15 US Industrial Production. Estimate 0.3%. Actual 0.7%
  • Tentative – New Zealand GDT Price Index
  • 18:45 New Zealand PPI Input. Estimate 0.3%
  • 18:45 New Zealand PPI Output. Estimate 0.4%

Upcoming Key Events

Wednesday (May 18)

  • 14:00 US FOMC Meeting Minutes

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Tuesday, May 17, 2016

NZD/USD May 17 at 10:20 EDT

Open: 0.6783 Low: 0.6779 High: 0.6840 Close: 0.6803

NZD/USD Technical

S3 S2 S1 R1 R2 R3
0.6542 0.6621 0.6738 0.6897 0.7011 0.7100
  • NZD/USD posted gains in the Asian session. The pair lost ground in the European session but has recovered in North American trade.
  • There is resistance at 0.6897
  • 0.6738 is providing support

Further levels in both directions:

  • Below: 0.6738, 0.6621 and 0.6542
  • Above: 0.6897, 0.7011, 0.7100 and 0.7231
  • Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is almost unchanged on Tuesday. Long positions have a slight majority (53%), indicative of slight trader bias towards NZD/USD continuing to move to higher 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.