NZD/USD – Kiwi Shrugs Off Excellent Trade Balance, US Durables Slide

NZD/USD is showing marginal movement on Thursday, as the pair trades at the 0.67 line early in the North American session. In economic news, New Zealand Trade Balance easily beat expectations, posting a surplus of NZ$339 million.There are no New Zealand releases on Thursday, as the country’s markets are closed for a holiday. In the US, Unemployment Claims came in at 267 thousand, within expectations. However, durable goods reports pointed to declines, disappointing the markets. On Friday, the US releases Final GDP, with the estimate standing at 1.0%.

New Zealand surprised the markets with a superb trade surplus of NZ$339 million, crushing the estimate of NZ$75 million. This was a second straight decline after seven consecutive declines. However, the lion’s share of this figure was a $267 million drilling platform, and the New Zealand dollar did not react to the positive reading. Michael Gordon, senior economist at Westpac Banking in New Zealand said that trade balance could soften, as oil imports have become more expensive while dairy export prices remain weak.

The US manufacturing sector has struggled, hurt by the global slowdown which has meant less demand for US-produced goods. Recent manufacturing readings have reflected a sector in deep trouble, so the markets were surprised as the Richmond Manufacturing Index surged in March. The indicator, which measures activity in the US Atlantic region, jumped to 22 points, its highest level since June 2010. We’ll get a look at additional manufacturing indicators on Thursday, with the release of US durable good reports.

Last week’s Federal Reserve policy statement appeared to pour cold water on any imminent rate hikes, but recent hawkish statements by Federal Reserve officials have surprised the markets and strengthened the US dollar. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June, if economic conditions improve. Although the dot plot (an FOMC projection of rate hikes) was lowered at the March meeting, he insisted that the Fed had not changed its path of rate hikes. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. Lockhart noted that the US economy was holding up well, despite weak global conditions. Lockart said that the economy was close to full employment and the Fed’s target of 2 percent inflation was attainable. There was further support for rate hikes from two other Fed presidents, Patrick Harker and James Bullard. Harker said that given the strong economy, the Fed should consider raising interest rates as early as the April meeting, and added that he favored at least three rate hikes during the year. On Wednesday, Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later. Given this flurry of statements, traders should treat an April move by the Fed as a reasonable possibility, with US employment and inflation numbers having a huge say on the Fed’s decision.

NZD/USD Fundamentals

Wednesday (March 23)

• 17:45 New Zealand Trade Balance. Estimate 75M. Actual 339M

Thursday (March 24)

• 8:15 US FOMC Member James Bullard Speaks
• 8:30 US Core Durable Goods Orders. Estimate -0.2%. Actual -1.0%
• 8:30 US Unemployment Claims. Estimate 267K. Actual 265K
• 8:30 US Durable Goods Orders. Estimate -3.0%. Actual -2.8%
• 9:45 US Flash Services PMI. Estimate 51.3 points
• 10:30 US Natural Gas Storage. Estimate 20B

Upcoming Key Events

Friday (March 25)

• 12:30 US Final GDP. Estimate 1.0%

*Key releases are highlighted in bold

*All release times are DST

NZD/USD for Thursday, March 24, 2016

NZD/USD March 24 at 9:00 DST

Open: 0.6718 Low: 0.6670 High: 0.6719 Close: 0.6694

NZD/USD Technical

• NZD/USD posted losses in the Asian session but reversed directions in European trade.
• There is resistance at 0.6738
• 0.6738 is providing support

Further levels in both directions:

• Below: 0.6605, 0.6449 and 0.6344
• Above: 0.6738, 0.6897, 0.7011 and 0.7100
• Current Range: 0.6605 to 0.6738

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing slight movement towards long positions. Long positions have a slight majority (54%), indicative of slight trader bias towards the pair moving to higher 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.