NZD/USD – Kiwi Rally Continues, GDT Price Index Next

NZD/USD has posted gains on Wednesday, as the pair trades slightly above the 0.68 line in the North American session. The New Zealand dollar has enjoyed a good week, climbing about 130 points against the greenback. On the release front, New Zealand Overseas Trade Index jumped 4.4% well above the estimate of 0.9%. Later in the day, New Zealand releases the GDT Price Index. In the US, today’s key indicator is a key manufacturing indicator, ISM Manufacturing PMI. The markets are expecting a weak reading of 50.5 in the April report. On Thursday, the US releases two employment indicators – ADP Nonfarm Payrolls and Unemployment Claims.

New Zealand continues to undergo a housing boom, compounded by record immigration levels. Housing remains in short supply in Auckland, the country’s largest city. Construction indicators are pointing upwards, but the housing shortage presents a tricky problem for the RBNZ. Inflation rates remain very low, but the RBNZ has been reluctant to lower rates (unlike the RBA), since such a move could exacerbate the housing situation and have negative effects on the economy. Still, the markets have priced in a quarter-point cut at the RBNZ’s June meeting, which would lower rates to an even 2.00%. Will the central bank follow expectations and lower rates next week? If so, the New Zealand dollar could lose ground.

Will the Fed raise rates in June or soon after? Recent comments by Federal Reserve chair Janet Yellen and other Fed policymakers have strongly hinted that a rate hike is on the table this summer. On Friday, Yellen said that if the US economy continued to improve, a rate hike would be appropriate in the “coming months”. This was followed by St. Louis Reserve President James Bullard, who said on Monday that global markets were “well prepared” for a summer interest rate rise, although he didn’t provide any specific dates. Odds of a rate hike in June have increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. According to CME Group, traders have priced in a June rate hike at 28%, 60% for July and 68% in September. Market sentiment has strongly shifted towards the Fed raising rates, and this could boost the US dollar against its rivals.

NZD/USD Fundamentals

Tuesday (May 31)

• 18:45 New Zealand Overseas Trade Index. Estimate 0.9%. Actual 4.4%

Wednesday (June 1)

• 9:45 US Final Manufacturing PMI. Estimate 50.5
• 10:00 US ISM Manufacturing PMI. Estimate 50.5
• 10:00 US Construction Spending. Estimate 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 58.0
• All Day – US Total Vehicle Sales. Estimate 17.2M
• 14:00 US Beige Book
• Tentative – New Zealand GDT Price Index

Upcoming Key Events

Thursday (June 2)

• All Day – OPEC Meetings
• 8:15 US ADP Nonfarm Employment Change. Estimate 177K
• 8:30 US Unemployment Claims. Estimate 270K

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Wednesday, June 1, 2016

NZD/USD June 1 at 9:40 EDT

Open: 0.6782 Low: 0.6772 High: 0.6830 Close: 0.6807

NZD/USD Technical

• NZD/USD was flat in the Asian session. The pair has posted gains in European session but has shown small losses early in North American trade
• 0.6738 is providing support
• There is resistance at 0.6897

Further levels in both directions:

• Below: 0.6738, 0.6621, 0.6542 and 0.6415
• Above: 0.6897, 0.7011 and 0.7100
• Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is unchanged on Wednesday. The ratio is evenly split between long and short positions, indicative of a lack of trader bias as to what position NZD/USD will take next.

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.