NZ Sees Budget Surplus, NZDUSD Outlook: 12/16

by on December 17, 2013 2:48 am GMT

Due to projections in a faster growing economy, the New Zealand government foresees a large budget surplus with an operating surplus of $86 million NZD through 2015. In 2016, the surplus forecast will reach $1.67 billion NZD, according to Finance Minister Bill English. These new expectations are larger than the $75 million NZD previously forecasted,

The government believes this will lessen the need to issue debt through bond markets. “This reinforces the solid state of the New Zealand economy and its fiscal position,” said Stephen Toplis, head of research at Bank of New Zealand Ltd. English said “the signs are now pretty evident that growth has picked up appreciably,” and that there will be continued restraint in government spending to ensure New Zealand’s growth continues.

According to Statistics New Zealand, 27K jobs were added in the three months ending on September 30, a six year high. Business confidence is also promising increasing to a 15-year high, according to ANZ Bank New Zealand. Just last month, New Zealand released trade balance data showed a narrowing in deficit and best October print since the early-90s.

Given the current successes of New Zealand, the currency remains in limbo and has wide swings in either direction. The daily chart shows that price is predominantly contained within a 100 pip range (not including wicks). There is clear support at the .8200 level, while resistance is  present just above .8300. Daily price action is currently trading into the apex of a triangle.

Tomorrow’s FOMC minutes could provide momentum in either direction.

1D Chart of NZDUSD

1D Chart of NZDUSD

Intraday action is similar, coiling to the apex of converging trend lines. Dynamic support is given through the 20, 50, 72 and 200 EMA are all layered within 30 pips of each other. Price action is located at .8240. Price action resistance is located near .8285.

There is a topside projection of .8320, while a rallying dollar after the FOMC will likely test the lower trend line near .8200.

4H Chart of NZDUSD

4H Chart of NZDUSD