NZD/USD - Kiwi Dips, Recovers After Failed Doha Meeting

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Includes: UDN, UUP
by: Dean Popplewell

By Kenny Fisher

NZD/USD has posted gains on Monday, continuing the trend which marked the Friday session. The pair is trading at 0.6930 early in the North American session. On the release front, New Zealand CPI posted a gain of 0.2% in the fourth quarter. In the US, it’s a quiet start to the week, with no major releases on the schedule. The NAHB Housing Market Index is expected to remain steady. As well, New York Fed president William Dudley will deliver remarks at a meeting in New York. On Tuesday, there are two key releases. New Zealand releases the GDT Price Index while the US publishes Building Permits.

The New Zealand dollar showed volatility over the weekend, as USD/NZD briefly lost ground after the Doha meeting, which ended without an agreement. Expectations were high that oil producers would reach a deal to cap production levels, but these hopes were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants, comprised of OPEC and non-OPEC members, went home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. US crude oil prices have reacted sharply, sliding 4.0% since the end of last week’s trading session.

New Zealand CPI, which is released on a quarterly basis, rebounded in the fourth quarter with a small gain of 0.2%. This edged above the forecast of 0.1% and was a strong improvement over the third quarter reading of -0.5%. The positive reading helped the New Zealand dollar recover after starting Monday’s Asian session with losses. We’ll get a look at the New Zealand Dairy Auction on Tuesday, another key release which could affect the movement of NZD/USD.

The US economy continues to perform well despite some weak sectors, such as the manufacturing industry. US manufacturers continue to face stiff competition with countries that pay much lower wages, such as China, India, and other Asian countries. With turbulent global economic conditions leading to weaker demand, the manufacturing sector is facing additional challenges. There was some positive news on Friday, as the Empire State Manufacturing Index climbed 9.6 points in April, crushing the estimate of 2.1 points. It was the indicator’s highest level since January 2015. We’ll get a look at the Philly Fed Manufacturing Index, a key manufacturing report, on Thursday. Meanwhile, the UoM Consumer Sentiment dropped to 89.7 points in April, short of the estimate of 91.9 points. Although consumer sentiment remains high, this marked the first time since September that the indicator fell below the symbolic 90 level.

NZD/USD Fundamentals

Sunday (April 17)

  • 6:45 New Zealand CPI. Estimate 0.1%. Actual 0.2%

Monday (April 18)

  • 8:30 US FOMC Member William Dudley Speaks
  • 10:00 US NAHB Housing Market Index. Estimate 59 points

Upcoming Key Events

Tuesday (April 19)

  • 8:30 US Building Permits. Estimate 1.20M
  • Tentative – New Zealand GDT Price Index

*Key releases are highlighted in bold

*All release times are DST

NZD/USD for Monday, April 18, 2016

NZD/USD April 18 at 9:20 DST

Open: 0.6889 Low: 0.6879 High: 0.6953 Close: 0.6928

NZD/USD Technical

S3 S2 S1 R1 R2 R3
0.6605 0.6738 0.6897 0.7011 0.7100 0.7231
Click to enlarge
  • NZD/USD posted gains in the Asian session, which was marked by strong volatility. The pair continued to post gains in the European session, but is showing slight losses early in North American trade.
  • 0.6897 was tested earlier is support and remains a weak line
  • There is resistance at 0.7011

Further levels in both directions:

  • Below: 0.6897, 0.6738, 0.6605 and 0.6449
  • Above: 0.7011, 0.7100 and 0.7231
  • Current Range: 0.6897 to 0.7011

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing little movement, consistent with a lack of significant movement from NZD/USD. Short positions have a strong majority (61%), 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.