NZD/USD – Kiwi Dips Below 66, New Zealand GDP Next

NZD/USD has posted losses on Wednesday, as the pair remains continues to lose ground this week. In the North American session, the pair is trading at 0.6590. In economic news, New Zealand will release GDP, with the estimate standing at 0.7%. It’s a busy day in the US, highlighted by the Federal Reserve rate announcement and policy statement. US consumer inflation indicators were mixed. CPI declined by 0.2%, matching the forecast. Core CPI looked stronger, posting a gain of 0.3%, edging above the estimate of 0.2%. Building Permits came in at 1.20 million, within expectations.

New Zealand’s economy is very dependent on the export sector, and policymakers are keeping a close eye on China, New Zealand’s second largest export market. The Royal Bank of New Zealand surprised the markets when it lowered rates from 2.50% to 2.25% last week, and RBNZ Governor Graeme Wheeler singled out China as the biggest risk to New Zealand’s growth, leaving the door wide open for further rate cuts. Despite the China slowdown and weak global demand, the New Zealand economy continues to grow, with GDP for the fourth quarter expected to rise by 0.7%. On Tuesday, the GDT Price Index slipped 2.9%, marking its fifth decline in six readings. There was better news from Current Account, as the deficit narrowed to NZ$2.61B, down from NZ$4.75 billion a month earlier.

Will the Federal Reserve press the rate trigger on Wednesday? Most experts are expecting the Fed to remain on the sidelines and not raise rates, given current economic conditions. Although the US economy continues to expand, growth has been softer in 2016 compared to the red-hot pace which marked the economy in the second half of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. Fed policymakers are divided on how to respond to persistently low inflation. Some FOMC members favor preempting inflation with a rate hike, while others feel that the economy is currently too fragile for such a move.

The markets are not anticipating any rate move at the upcoming Fed meeting, but there is intense interest in the Fed’s “dot plot” (a chart of rate hike expectations released each quarter). When the Fed raised interest rates in December, the dot plot called for four hikes in 2016 and projected rates would be between 1.25% and 1.50% by the end of 2016. Many experts have argued that the dot plot is not in sync with market projections of rate increases, and the December dot plot releases appears to bolster their argument. With the cooling off of the US economy early in 2016, the March dot plot is likely to project two or three rate moves in 2016, but many market players see the Fed opting not to raise rates again until next year.

NZD/USD Fundamentals

Tuesday (March 15)

  • 10:09 New Zealand GDT Price Index. Actual -2.9%
  • 17:45 New Zealand Current Account. Estimate -2.97B. Actual -2.97B

Wednesday (March 16)

  • 8:30 US Building Permits. Estimate 1.20M. Actual 1.17M
  • 8:30 US CPI. Estimate -0.2%. Actual -0.3%.
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.3%
  • 8:30 US Housing Starts. Estimate 1.15M. Actual 1.18M
  • 9:15 US Capacity Utilization Rate. Estimate 76.9%. Actual 76.7%
  • 9:15 US Industrial Production. Estimate -0.2%. Actual -0.5%
  • 10:30 US Crude Oil Inventories. Estimate 2.9M. Actual 1.3M
  • 14:00 FOMC Statement
  • 14:00 FOMC Federal Funds Rate
  • 14:30 FOMC Press Conference
  • 17:45 New Zealand GDP. Estimate 0.7%

Upcoming Key Events

Thursday (March 17)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -1.4
  • 8:30 Unemployment Claims. Estimate 267K

*Key releases are highlighted in bold

*All release times are DST

NZD/USD for Wednesday, March 16, 2016

NZD/USD March 16 at 11:15 DST

Open: 0.6610 Low: 0.6575 High: 0.6624 Close: 0.6591

NZD/USD Technical

S3 S2 S1 R1 R2 R3
0.6209 0.6344 0.6449 0.6605 0.6738 0.6897
  • NZD/USD has been showing marginal movement during the day
  • 0.6605 has switched to resistance as the pair drops to lower levels
  • 0.6449 is providing strong support

Further levels in both directions:

  • Below: 0.6449, 0.6344 and 0.6209
  • Above: 0.6605, 0.6738, 0.6897 and 0.7011
  • Current Range: 0.6449 to 0.6605

OANDA’s Open Positions Ratio

The NZD/USD ratio has shown slight movement towards long positions, which have a strong majority (57%). This is indicative of trader bias towards NZD/USD reversing directions and moving 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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

Latest posts by Kenny Fisher (see all)