Kiwi dollar has been trending higher slowly, conquering new heights 1 step at a time. Price has not seen any significant dip since the bullish break of 0.845 on Monday, and instead formed consolidation bands which have been well respected as price ploughed towards the 2013 highs.
Today’s Chinese Import data helped in NZD/USD’s latest push higher with a print of +14.1% Y/Y growth. This improvement from last month’s -15.2% and expectations of 6.0% is an indication of strong Chinese domestic demand, and will certainly help economies of countries like New Zealand that exports heavily into China.
Prices traded higher on the data release, affirming 0.852 support. Yet price was not able to push higher beyond the recent swing high that was formed during the later hours of US session yesterday. Unlike AUD/USD which rallied more than 50 pips higher, the reaction from Kiwi dollar was less than spectacular. Certainly the Chinese Trade Balance data is not all rosy, as Exports growth has fallen short of expectations, coming in at 10.0% vs a forecast of 11.7%. However that reason alone should not have shackled NZD/USD so terribly considering current bullish bias. This is a huge contrast from yesterday’s sentiment, which resulted in the Stochastic bearish breakout coming to naught.
Stochastic readings suggest that readings are forming a interim trough in the Overbought region, which suggest that price could still test current swing high once more. However, a strong bullish break from here on may be difficult, and price could simply revert to the 20 pip climb we have grown accustomed to in the past 2 days.
Daily chart shows Feb’s high being tested, with Stoch readings showing similar interim trough within the Overbought region. From a technical point of view, it remains possible that price can still venture higher, though follow-through may be suspect given how extended price has become since pushing from Mar lows.
Fundamentally, it is strange to see NZD/USD climbing when the worst drought in 10 years continue to ravage production output. Export capability of New Zealand is certain to fall even before taking into consideration the stagnating global growth. As such, it is hard to fathom strong fundamental reasons that can take Kiwi higher from here out. There remains the chance of RBNZ issuing rate hikes to curb inflation and lower housing prices, with RBNZ Spencer saying earlier this week that Rate Hike is a real possibility. However, Governor remains silent, leaving question marks on the eventuality of the outcome. Furthermore, NZD/USD seemed to have priced in that scenario rather nicely with price pushing from 0.84 to current levels without any strong fundamental news released this week. This will again limit upside even if RBNZ does carry through with rate hikes soon.
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