The New Zealand dollar has posted strong gains in the Tuesday session. Currently, NZD/USD is trading at 0.7164, up 0.60% on the day.
Manufacturing, Business Confidence weaken
New Zealand can be considered a success story when it comes to the battle with Covid-19. The island country has largely contained the pandemic, and reacted swiftly to any Covid cases. The economy went into a recession in 2020 as a result of the severe health restrictions, but has rebounded, with economic activity closing in on pre-Covid levels. The New Zealand dollar showed impressive strength as a result, rising close to 75 cents in February, its highest level since August 2017. However, the US dollar has fought back, receiving a boost from higher US Treasury yields. NZD/USD has fallen about 1% in March, and the New Zealand dollar fell below the 71 level on Friday, after a US nonfarm payroll report that was much stronger than expected.
This week’s numbers out of New Zealand have been soft, but the New Zealand dollar has managed to stay in positive territory. Manufacturing Sales were stagnant in Q4, with a reading of -0.6%. This followed a gain of 10%, although that sharp gain is somewhat misleading, as it didn’t even cover the -11.2% release in the second quarter. As well, ANZ Business Confidence de-accelerated to a flat 0.0 in March, down from 11.8 a month earlier. Investors have shrugged off these weak numbers, but if upcoming New Zealand numbers miss expectations, that could put pressure on the New Zealand dollar.
The US economy is showing signs of a deepening recovery, and pent-up demand has raised expectations of higher inflation in the coming months. Investors will be keeping a close eye on US inflation, which will be released on Wednesday (15:30 GMT). Inflation is projected to rise slightly in February, and a stronger than expected CPI report could raise concerns about the economy overheating.
- There is resistance at 0.7280, followed by resistance at 0.7398
- The first level of support is 0.7072, followed by a support level at 0.6982