NZD/USD – Kiwi Subdued, NZ Rate Decision, Trade Balance Loom

The New Zealand dollar is uneventful on Tuesday, as NZD/USD is trading at 0.6460 in the European session. In economic news, New Zealand Credit Card Spending kicked off the week with a gain of 7.4%, down from 8.5% a month earlier. There are no New Zealand releases on Tuesday, but the markets are keeping a close eye on the RBNZ Rate Decision and the New Zealand Trade Balance, which will be released on Wednesday. In the US, today’s key event is CB Consumer Confidence, with the markets forecasting a strong reading of 96.6 points.

Like other minor currencies, the New Zealand dollar has endured a miserable January, plunging close to 400 points since the start of the year. The kiwi has taken a sharp hit due to the slowdown in China, with Chinese stock markets down sharply and Chinese GDP continuing to edge lower. As well, the oil collapse has contributed to NZD/USD losing ground, with the commodity mired at 12-year lows. These events have resulted in nervous investors dumping risky currencies like the New Zealand dollar, in favor of safe-haven assets such as the yen and US dollar. With the appetite for risk on hold, the New Zealand dollar will remain under pressure and could lose more ground to the US dollar. The RBNZ lowered interest rates four times in 2015, most recently in December, with a cut from 2.75% to 2.50%. No change is expected in the January rate decision. We’ll also get a look at New Zealand Trade Balance, with the markets expecting a huge drop in the deficit, with an estimate of NZ $-130 million. A strong improvement in the deficit could bolster the struggling New Zealand dollar.

Market focus will shift to the Federal Reserve on Wednesday, as the Fed concludes a two-day meeting and issues a policy statement. It’s unlikely that the Fed will raise interest rates, which currently stand at 0.25%. Economic conditions have changed significantly since the Fed raise rates in mid-December, with global stock markets and oil prices sharply lower since the historic December rate hike. According to Morgan Stanley Morgan chief economist Ellen Zentner, financial conditions have tightened by the equivalent of four rate hikes, so the Fed may opt to hold off from further tightening for the near future. We can expect the Fed to perform a balancing act in the upcoming statement, acknowledging weaker economic conditions while emphasizing that the economy continues to grow. The collapse of oil prices has contributed to the weak inflation picture, with current inflation levels well below the Fed target of 2.0%. Traders should be prepared for possible volatility following the upcoming policy statement.

NZD/USD Fundamentals

Monday (Jan. 25)

• 21:00 New Zealand Credit Card Spending. Actual 7.4%

Tuesday (Jan. 26)

• 9:00 US HPI. Estimate 0.4%
• 9:00 S&P/CS Composite-20 HPI. Estimate 5.7%
• 9:45 US Flash Services PMI. Estimate 53.9 points
• 10:00 US CB Consumer Confidence. Estimate 96.6 points
• 10:00 US Richmond Manufacturing Index. Estimate 3 points

Wednesday (Jan. 27)

• 15:00 New Zealand Official Cash Rate. Estimate 2.50%
• 15:00 New Zealand Rate Statement
• 16:45 New Zealand Trade Balance. Estimate -130M

*Key releases are highlighted in bold

*All release times are EST

NZD/USD for Tuesday, January 26, 2016

NZD/USD January 26 at 7:40 GMT

Open: 0.6439 Low: 0.6424 High: 0.6470 Close: 0.6462

NZD/USD Technical

• NZD/USD has been showing limited movement in the Asian and European sessions
• There is resistance at 0.6605
• 0.6449 was tested earlier as a support line, and could break during the day
• Current range: 0.6449 to 0.6605

Further levels in both directions:

• Below: 0.6449, 0.6344, 0.6233 and 0.6152
• Above: 0.6605, 0.6738 and 0.6897

OANDA’s Open Positions Ratio

In the NZD/USD ratio, long positions have a sizable majority of positions (58%) on Tuesday. This is indicative of trader bias towards the pair pushing higher.

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.