NZD/USD – Kiwi Steady Ahead of Federal Reserve Meeting

NZD/USD is showing limited movement on Tuesday, as the pair trades at 0.6750 in the North American session. In economic news, the New Zealand GDT Price Index posted a gain of 1.9%. Later on Tuesday, New Zealand will release Current Account, followed by the all-important GDP on Wednesday. Over in the US, US, Core CPI posted a gain of 0.2% and CPI came in at 0.0%, as both reports matched their estimates.  As well, the Empire State Manufacturing Index posted a fifth consecutive decline, coming in at -4.6 points. All eyes are fixed on the Federal Reserve policy meeting on Wednesday, with the Fed expected to raise interest rates for the first time in almost 10 years.

There was positive news out of New Zealand on Tuesday, as the GDT Price Index posted a gain of 1.9%. This was a second straight gain for the key indicator, breaking a nasty streak of three consecutive declines. Later on Tuesday, Current Account will be released. The markets bracing for a sharp rise in the current account deficit, with an estimate of NZ$4.85 billion. This will be followed by GDP, which should be treated as market-mover.

The currency markets are in a waiting mode, ahead of the upcoming crucial Fed meeting which could prove to be the economic release of the year. The Fed will conclude a two-day policy meeting on Wednesday and all indications are that the Fed will raise rates by 0.25%, to be followed by further rate hikes in 2016. The Fed last raised rates back in June 2006, and Fed chief Janet Yellen and other policymakers have sent broad signals to the markets that the US central bank if finally ready to press the rate trigger. The US economy is close to full employment, and Yellen recently stated that she was not concerned about persistently low inflation. How will the currency markets react to a historic rate hike by the Fed? Given that the markets have had ample time to price in this event, we may not see a strong response immediately after the event. At the same time, even a small rate increase represents a huge shift in the Fed’s monetary policy, which could help boost the US dollar against its rivals in the near future.

NZD/USD Fundamentals

Tuesday (Dec. 15)

• 13:30 US CPI. Estimate 0.0%. Actual 0.0%
• 13:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 13:30 US Empire State Manufacturing Index. Estimate -5.7 points. Actual -4.6 points
• 13:52 New Zealand GDT Price Index. Actual 1.9%
• 15:00 US NAHB Housing Market Index. Estimate 63 points. Actual 61 points
• 21:00 US TIC Long-Term Purchases. Estimate 32.4B
• 21:45 New Zealand Current Account. Estimate -4.85B

Upcoming Key Events

Wednesday (Dec. 16)

• 13:30 US Building Permits. Estimate 1.16M
• 19:00 US FOMC Economic Projections
• 19:00 US FOMC Statement
• 19:00 US Federal Funds Rate. Estimate <0.50%
• 19:30 US FOMC Press Conference
• 21:45 New Zealand GDP

*Key releases are highlighted in bold

*All release times are GMT

NZD/USD for Tuesday, December 15, 2015

NZD/USD December 15 at 17:30 GMT

NZD/USD 0.6751 H: 0.6826 L: 0.6740

NZD/USD Technical

• NZD/USD was uneventful in the Asian and European sessions. The pair has posted losses in North American trade.
• 0.6738 is under strong pressure in support, and could break during the North American session.
• 0.6897 is a strong resistance line.
• Current range: 0.6738 to 0.6897

Further levels in both directions:

• Below: 0.6738, 0.6605, 0.6449 and 0.6368
• Above: 0.6897, 0.70, and 0.7128

OANDA’s Open Positions Ratio

NZD/USD ratio is showing a majority of short positions (54%). This is indicative of trader bias towards the pair moving to lower levels.

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.