NZ dollar higher, Manufacturing Index next

The New Zealand dollar has reversed directions on Thursday and recorded slight gains. Currently, NZD/USD is trading at 0.7230, up o.21% on the day.

Will Business NZ Manufacturing Index rebound?

The New Zealand economy has recovered in impressive fashion since the dark days of 2020, which saw the economy fall into a recession. Investors will be hoping for a strong showing from an important manufacturing indicator, BusinessNZ Manufacturing Index (21:30 GMT). The index surprised with a steep decline in December, falling from 54.7 to 48.7 index points. This reading pointed to contraction in manufacturing, below the neutral 50-level. This was the first contraction since May. A reading above 50, which would point to expansion, could give the New Zealand dollar a lift. On the inflation front, New Zealand will also release the Food Price Index for January. The index posted a negligible gain of 0.1% in December, ending a nasty streak of three successive declines. A stronger gain would indicate that inflation is moving higher.

RBNZ moves to ease housing bubble

The strong recovery by the New Zealand economy has created its own set of problems, including an overheated housing market. With housing prices climbing sharply, the government is taking steps to curb speculators, who are looking to profit from even higher house prices. The availability of cheap mortgages has led to sharp housing inflation. The RBNZ announced on Tuesday that it will reintroduce mortgage lending restrictions in order to reduce demand and avoid a sudden burst of the housing bubble. The central bank is understandably concerned that a sharp correction in housing prices could cause financial instability and has responded by sharply increasing the down payments that investors will need to pay when purchasing a house.

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NZD/USD Technical

• NZD/USD is testing resistance at 0.7240. Close by, there is resistance at 0.7277
• There is support at 0.7150, which is also where the 50-day moving average (MA) is located. Below, we find support at 0.7097

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