NZD/USD Technicals – RBNZ Next Week Eyed as Drought Hits New Zealand

Recent droughts in New Zealand is estimated to cost NZ economy 1 billion NZD. The drought is likely to impact volume of food products produced, pushing up prices and limiting appeal of Kiwi exports. However, despite the reports, NZD/USD continue to trade higher, pushing a near weekly high above 0.8310. There are talks that short traders were covering their positions after market reaction to RBA’s rate decision, with speculations that next week’s RBNZ decision may produce similar bullish reactions, which contributed to the rally. Over on the US side, fresh historical highs on Dow increased optimism in the market, driving USD lower and push commodity currencies higher. “Risk” currencies also enjoyed the spillover from Crude Oil rally following the report of Venezuelan President Hugo Chávez’s death.

Hourly Chart

Current price levels look tentative after the break below 0.8325. Price is currently trying to break back above 0.8325, a failure of which may accelerate bearish momentum as Stochastic is suggesting a down cycle has already begun. Price may find support along the Kijuu Sen (red line) which is the confluence with the previous swing high on 5th March, with further support to be found by the Kumo which is also around the 0.8270 support/resistance.

Daily Chart

Daily Chart is looking more bearish with the Kumo breakout not yet invalidated. Price is currently retesting the Kumo but may find further resistance around 0.835 which has been acting as a support since Jan 2013. Stochastic is optimistic that price may return to bullishness, though failure to break out higher of the Kumo during the bullish cycle will place the initiative back into bears’ hands.

RBNZ’s Wheeler may continue his dovish rhetoric next week. If that is the case, do not expect market to sell NZD/USD if Wheeler fails to show any plans to go with his words. From what we’ve seen from RBA and BOJ’s recent statements, it seems that market is no longer impressed with mere words, and would like to see Central Bankers walking the talk. However, actions is certainly in short supply these days, what with G20’s agreement to avoid “currency wars”. It seems that Central Bankers will have to keep to talking in the meantime.

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