The Kiwi has been on an impressive uptrend over the last week, rising from 0.6519 to 0.6785 against the USD. The first jump took place on November 1, most likely in response to improved economic conditions in the country.
As a result of the higher than expected trade deficit, which was driven by higher imports of goods and despite the increase in exports, New Zealand has boasted a much lower than expected unemployment rate, an unexpected improvement in the participation rate and a higher than expected employment change. All of the above, in conjunction with RBA’s decision not to increase interest rates “for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation” has further promoted the view of prosperity and pushed expectations to new highs. While RBA acknowledges that the economy is approximately at its maximum sustainable level, it appears that it is willing to allow for this situation to persist until inflation stabilises around 2%.
Technically, the NZDUSD has broken the 0.6653 support level (23.6% Fib) and has continued to move to the long-term level of 0.6794 (38.2% Fib), trading at 0.6784 at the moment. If the pair crosses that resistance level, then the next psychological barrier is expected to stand at about 0.6846. The continuation of this trend is naturally conditional of the developments in the US economy, such as the PPI and Michigan sentiment indices tomorrow.
Click here to access the HotForex Economic Calendar
Dr Nektarios Michail
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.