NZD/USD – Little Change as Manufacturing Inflation Dips

NZD/USD is listless on Thursday and is trading at 0.6630 in the North American session. On the release front, New Zealand inflation numbers were weak, as PPI Input posted a decline of 1.2%. In the US, the Philly Fed Manufacturing Index came in at -2.8 points, close to the estimate. Unemployment Claims dropped to 262 thousand, beating expectations. On Friday, we’ll get a look at US CPI, the primary gauge of consumer inflation.

New Zealand’s inflation picture continues to raise concerns. PPI Input, which measures inflation in the manufacturing sector, came in at -1.2%, compared to the previous reading of +1.6%. Earlier in the week, Inflation Expectations, which surveys business managers, dropped to 1.6%, its lowest level since 1994. Low inflation levels, exacerbated by the collapse of oil prices, is hampering economic growth. Despite this, the New Zealand dollar has actually risen in 2016, and garnered the attention of Prime Minister John Key, who said he was surprised that the currency hadn’t lost ground in line with falling dairy prices.

All eyes were on the Federal Reserve on Wednesday, in anticipation of the release of the minutes of its January policy meeting. At that meeting, the Fed held rates at 0.25%, after raising rates in December for the first time in almost 10 years. The minutes reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, and this was reiterated on Wednesday by FOMC member Neel Kashkari, who said that a March rate hike was on the table, provided that the economy improved and inflation firmed. Still, a growing number of market players are skeptical that the Fed will make any moves before next year. Back in the heady days of December, the Fed hinted at a series of rate hikes during 2016, but the turmoil in the financial markets and the downturn in the US economy in 2016 has quickly dampened expectations of a rate move.

NZD/USD Fundamentals

Wednesday (Feb. 17)

• 16:45 New Zealand PPI Input. Actual -1.2%

Thursday (Feb. 18)

• 8:30 US Philly Fed Manufacturing Index. Estimate -2.9 points. Actual -2.8 points
• 8:30 US Unemployment Claims. Estimate 275K. Actual 262K
• 10:00 US CB Leading Index. Estimate -0.1%
• 10:30 US Natural Gas Storage. Estimate -154B
• 11:00 US Crude Oil Inventories. Estimate 3.2M

Upcoming Key Events

Friday (Feb. 19)

• 8:30 US CPI. Estimate -0.1%
• 8:30 US Core CPI. Estimate +0.2%

*Key releases are highlighted in bold

*All release times are EST

NZD/USD for Thursday, February 18, 2016

NZD/USD February 18 at 10:20 EST

Open: 0.6578 Low: 0.6552 High: 0.6654 Close: 0.6629

NZD/USD Technical

• NZD/USD posted gains in the Asian session but then reversed directions. The pair has continued to move downward in the European and North American sessions.
• There is resistance at 0.6738
• 0.6605 is providing support. It is a weak line.

Further levels in both directions:

• Below: 0.6605, 0.6449, 0.6344 and 0.6233
• Above: 0.6738, 0.6897 and 0.7011

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing slight movement towards short positions, which currently have a majority of positions (58%). This is indicative of trader bias towards NZD/USD reversing directions and heading to lower ground.

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.