NZD extends losses ahead of mfg. sales

The New Zealand dollar is trading lower on Tuesday, after starting the week with considerable losses. NZD/USD is trading just above the 0.68 line in the North American session.

Investors are keeping an eye on New Zealand Manufacturing Sales, which will be released later in the day. After a dismal release in Q3 of -6.4%, we should see an improvement in the Q4 report.

We’ve seen plenty of activity from the New Zealand dollar, which sparkled last week with gains 1.75%, its best week since August 2021. As commodity prices soared, the commodity-based New Zealand dollar proved to be an attractive asset for investors.

New Zealand dollar vulnerable to haven flows

The New Zealand dollar is also sensitive to risk, and haven flows into the US dollar have come at the expense of the kiwi and other risk currencies. This accounts for the NZD/USD downswing at the start of the week, and the currency is vulnerable to a further drop in risk appetite. The war in Ukraine has triggered a massive refugee crisis and Brent crude has climbed to a staggering USD 130 today. Oil prices will likely continue to rise after US President Biden announced today that the US was banning Russian imports of natural gas, coal and oil.

The Federal Reserve is set to raise interest rates next week, in what will almost certainly be a 25-basis point hike. What the Fed does after is far from clear, as the Ukraine war and skyrocketing oil prices could see the Fed raise rates at a slower pace than it had intended. The markets had priced up to six rate hikes this year, but with a war raging in Europe and oil at extreme highs, this projection may have to be scaled back.

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NZD/USD Technical

• 0.6803 is a weak support line. Below, there is support at 0.6733
• There is resistance at 0.6931 and 0.7000

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