NZD/USD – New Zealand Dollar Higher as Market Mood Improves

The New Zealand dollar has posted considerable gains on Tuesday, erasing most of the losses sustained in the Monday session. The pair is trading at 0.7050 in the North American session. On the release front, US Final GDP posted a gain of 1.1%, within expectations. The CB Consumer Confidence report improved to 98.0 points, well above the estimate. There are no New Zealand releases on Tuesday. We’ll get a look at ANZ Business Confidence on Wednesday.

In the US, GDP was revised upwards in the first quarter. Final GDP for the first quarter posted a gain of 1.1%, above the estimate of 1.0%. This reading was stronger than the Preliminary GDP reading of 0.8%. Although the upward revision was welcome news, the revised GDP report marked the weakest gain in a year. On the consumer front, CB Consumer Confidence impressed by climbing to 98.0 points, easily beating the forecast of 93.2 points. Is US consumer confidence strengthening? It’s not clear, as last week’s UoM Consumer Sentiment report dropped to 93.4 points and missed expectations. Consumer confidence is closely linked to consumer spending, and we’ll get a look at Personal Spending on Wednesday.

There was excellent news from New Zealand to start off the week, as the trade surplus jumped to NZ$385 million in May, much higher than the forecast of NZ$185 million. The robust figure was bolstered by strong Chinese demand for logs, and marked the highest surplus since March 2015. Despite the impressive release, the New Zealand dollar lost ground on Monday as investors were in no mood to snap up risky assets like the New Zealand dollar. However, sentiment has improved on Tuesday, as the markets begin to digest the UK vote to leave the European Union, which caught the markets completely by surprise.

With the aftershocks of the Brexit vote continuing to reverberate in the Britain and Europe, political leaders must now pick up the pieces and deal with the radical new landscape, which was unthinkable just a few months ago – that of a European Union without Britain. The historic decision raises many questions and has resulted in political and financial instability in Europe and the UK, and wiped out a staggering $3 trillion from global stock markets. The British pound has tumbled about 11 percent since the vote, and the Australian dollar took a hit as well, as investors dumped risky assets in favor of safe-haven assets like gold and the Japanese yen. Chancellor of the Exchequer George Osborne and Bank of England Governor Mark Charney have sought to reassure the markets and the public that the situation is under control, but is it? The political picture is fluid, with Prime Minister Cameron resigning, the Labor Party in turmoil, and general elections likely later in the year. On the financial front, the pound and the markets have taken a beating, and London’s position as a world financial center has been shaken. The uncertainty is not going to disappear anytime soon, so traders should be prepared for further volatility in the currency markets.

British Prime Minister Cameron is meeting with his EU colleagues in Brussels for a 2-day summit, and already there are signs that this divorce between Britain and the EU could be rancorous and messy. Cameron said on Monday that his successor would be the one to initiate the exit mechanism, and other British politicians have said there is no rush to leave. However, European lawmakers, furious with the decision, have called on Britain to leave as soon as possible. Britain may have voted “Leave”, but clearly the timing and the type of exit plan remain unclear. The future framework of political and economic relations between the UK and the continent will have to be negotiated, and we will see plenty of uncertainty and perhaps fireworks in the coming months.

NZD/USD Fundamentals

Tuesday (June 28)

• 8:30 US Final GDP. Estimate 1.0%. Actual 1.1%
• 8:30 US Final GDP Price Index. Estimate 0.6%. Actual 0.4%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.5%. Actual 5.4%
• 10:00 US CB Consumer Confidence. Estimate 93.2. Actual 98.0
• 10:00 US Richmond Manufacturing Index. Estimate 2 points
• 19:00 FOMC Member Jerome Powell Speaks

Wednesday (June 29)

• 21:00 New Zealand ANZ Business Confidence

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Tuesday, June 28, 2016

NZD/USD June 28 at 10:30 EDT

Open: 0.7009 Low: 0.6996 High: 0.7085 Close: 0.7052

NZD/USD Technical

• NZD/USD posted considerable gains in the Asian session. The pair has been flat in the European and North American sessions
• There is resistance at 0.7100
• 0.7011 is fluid and providing weak support
• Current range: 0.7011 to 0.7100

Further levels in both directions:

• Below: 0.7011, 0.6897 and 0.6793
• Above: 0.7100, 0.7231, 0.7319 and 0.7454

OANDA’s Open Positions Ratio

NZD/USD ratio is showing little movement on Tuesday. Long positions command a strong majority (59%). This is indicative of trader bias towards NZD/USD continuing to post gains.

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.