NZD/USD – New Zealand Dollar Higher on Sharp Business Confidence

NZD/USD has posted gains on Tuesday, as the pair trades at 0.6740 early in the North American session. On the release front, New Zealand ANZ Business Confidence improved to 11.3 points, marking a four-month high. In the US, Personal Spending climbed 1.0%, beating the estimate. Later in the day, we’ll get a look at CB Consumer Confidence. The markets are expecting the indicator to improve to 96.1 points. On Wednesday, the US releases ISM Manufacturing PMI, while New Zealand publishes the bi-weekly GDT Price Index.

US Personal Spending looked sharp in April, jumping 1.0%. This beat the forecast of 0.7% and marked the indicator’s strongest gain since 2009. Will CB Consumer Confidence follow suit? A strong release could point to an improving US economy, as consumer confidence often translates into consumer spending, a key driver of economic growth. On Friday, Preliminary GDP, which can be viewed as an economic report card, posted a gain of 0.8%, matching the forecast. This was an improvement above Advanced GDP, which came in at 0.5%. Still, the economy slowed down considerably compared to the fourth quarter of 2015. The export sector has been hurt by the strong US dollar and weak global demand. Oil prices remain low, which has taken a sharp toll on the oil industry. Elsewhere, the UoM Consumer Sentiment report improved in April, climbing to 94.7 points. This marked the indicator’s highest level in 11 months, although it was short of the estimate of 95.7 points.

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 sharply increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. Last week, FOMC member John Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between the hawkish message some FOMC members are sending out and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.

NZD/USD Fundamentals

Monday (May 30)

• 18:45 New Zealand Building Consents. Actual 6.6%
• 21:00 New Zealand ANZ Business Confidence. Actual 11.3

Tuesday (May 31)

• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.7%. Actual 1.0%
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.1%. Actual 5.4%
• 9:45 US Chicago PMI. Estimate 50.8
• 10:00 US CB Consumer Confidence. Estimate 96.1
• 18:45 New Zealand Overseas Trade Index. Estimate 0.9%

Wednesday (June 1)

• 14:00 US ISM Manufacturing PMI. Estimate 50.5
• Tentative – New Zealand GDT Price Index

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Tuesday, May 31, 2016

NZD/USD May 31 at 9:20 EDT

Open: 0.6707 Low: 0.6704 High: 0.6759 Close: 0.6742

NZD/USD Technical

• NZD/USD has posted gains in the Asian and European sessions. The pair has posted small losses in North American trade
• 0.6738 has switched to a support role following gains by NZD/USD. It remains fluid
• 0.6897 is a strong resistance line

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 showing movement towards short positions on Tuesday. The ratio is almost 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.