Strong US dollar send NZD reeling

The New Zealand dollar has posted sharp losses in the Thursday session. Currently, NZD/USD is trading at 0.7157, up 0.70% on the day.

New Zealand Business Confidence sparkles

The US dollar has shown broad gains on Thursday, and the New Zealand currency has taken it on the chin. This, despite an excellent reading from ANZ Business Confidence. The preliminary estimate showed a gain of 11.9 in February, up from the previous reading of 9.4. What is particularly encouraging is that many of the indicators in the survey showed that business activity had recovered to pre-Covid levels. This is another indicator that the New Zealand economy is rapidly on the way to recovery, after a difficult year in 2020.

It seems that everywhere one looked this week, New Zealand economic indicators were pointing upwards. The ANZ Commodity Prices rose 3.6% in January, which was its highest gain in 14 months. As well, Building Consents accelerated to 4.9%, up from 1.2% beforehand. This week’s piece de resistance, was, of course, the superb employment numbers for the fourth quarter of 2020. Employment Change rose 0.6% and the unemployment rate fell from 5.3% to 4.9%, knocking the street consensus of 5.6% on its head. The surprisingly sharp job numbers have caused a significant shift in market sentiment towards interest rate policy. Until this week, the markets had anticipated that the RBNZ would lower rates later this year, and it was only a few months ago that there was talk of the central bank introducing negative rates. That has all changed, and the Bank of New Zealand is now forecasting that the RBNZ will raise interest rates in May 2022. The market view of the central bank’s future monetary policy has clearly shifted in a hawkish direction.

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NZD/USD Technical

  • NZD/USD faces resistance at 0.7251. This is followed by resistance at 0.7321
  • There is support at 0.7109. Below, we find support at 0.7057
  • The pair is putting pressure on the 50-day moving average (MA), which is situated at 0.7136. A close below this line is a bearish technical signal

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.