NZD/USD – Kiwi Edges Lower on Mixed New Zealand Numbers

NZD/USD has posted slight losses on Wednesday, erasing the gains which marked the slight gains which marked the Tuesday session. The pair is trading at 0.6770 in the North American session. On the release front, New Zealand manufacturing reports disappointed, as PPI Input and PPI Output both posted declines and missed expectations. The GDT Price Index posted a strong gain of 2.6%. In the US, Crude Oil Inventories posted a gain of 1.3 million, much higher than expectations. Later in the day, the Federal Reserve will release the minutes of its April policy meeting. On Thursday the US will release Unemployment Claims and the Philly Fed Manufacturing Index.

New Zealand indicators were a mixed bag on Tuesday. PPI Input, which measures inflation in the manufacturing sector, posted a sharp decline of -1.0%, much weaker than the estimate of +0.3%. This marked the indicator’s second straight decline. PPI Output, a minor event, also posted a decline. The soft figures reflect persistently weak inflation levels which continue to hamper the economy. The RBNZ has sent the message that it is prepared to lower rates if inflation levels don’t improve, so New Zealand inflation numbers will be under the market microscope. Inflation is currently running at 0.4%, well short of the RBNZ’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns overheating the tight housing market. There was better news from the GDT dairy auction, which posted a gain of 2.6%, a strong turnaround after a decline of 1.4% in the previous reading.

All eyes are on the Federal Reserve on Wednesday, with the release of the April minutes. The Fed has sent out the message that a June hike is on the table, but the markets remain skeptical, especially after the weak Nonfarm Payrolls report earlier this month. With the economy showing mixed employment numbers and inflation stuck at low levels, a June hike would be nothing less than a shock, a reason in itself for the Fed to remain on the sidelines. The Fed insists that June will be a “live meeting”, meaning that it will carefully weigh the possibility of a rate hike. The markets don’t seem to be buying into this message, clearly expecting rates to remain at the current level of 0.25%, with the implied probability of a hike down to just 4%. The upcoming minutes could provide some insight as to whether the Fed is considering a move at the June meeting.

NZD/USD Fundamentals

Monday (May 16)

• 23:00 New Zealand Inflation Expectations. Actual 1.6%

Upcoming Key Events

Tuesday (May 17)

• 10:15 New Zealand GDT Price Index. Actual 2.6%
• 18:45 New Zealand PPI Input. Estimate 0.3%. Actual -1.0%
• 18:45 New Zealand PPI Output. Estimate 0.4%. Actual -0.2%

Wednesday (May 18)

• 10:30 US Crude Oil Inventories. Estimate -3.1M. Actual 1.3M
• 14:00 US FOMC Meeting Minutes

Upcoming Key Events

Thursday (May 19)

• 8:30 US Philly Fed Manufacturing Index. Estimate 3.2
• 8:30 US Unemployment Claims. Estimate 276K

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Wednesday, May 18, 2016

NZD/USD May 18 at 11:15 EDT

Open: 0.6798 Low: 0.6748 High: 0.6801 Close: 0.6770

NZD/USD Technical

• NZD/USD was uneventful in the Asian session. The pair posted losses in the European session but has partially recovered in North American trade.
• There is strong resistance at 0.6897
• 0.6738 is a weak support line

Further levels in both directions:

• Below: 0.6738, 0.6621 and 0.6542
• Above: 0.6897, 0.7011, 0.7100 and 0.7231
• Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing little change on Wednesday, consistent with the lack of significant movement from NZD/USD. Long positions have a majority (55%), indicative of trader bias towards NZD/USD reversing directions and losing 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.