NZDUSD fell from the supply zone indicated in the previous weekly outlook, but upbeat fundamentals, along with technical support, boosted price action back into the supply zone. Selling was present at the top of the range, and it looks like the supply zone could be in play again.
New Zealand’s dairy industry got a boost as the trade balance seen a surplus for the third straight month. The trade surplus of $306 million in January, slightly lower than the $493 million seen is December. Dairy exports to China hit record levels. While exports to Australia fell 13 percent, there was a jump in exports to China by a whopping 92 percent to $1.2 billion, largely in milk powder. Imports from China increased by 6.5 percent, whereas imports from Australia fell by 22 percent. Westpac Banking economist Anne Boniface said “the strength of Chinese demand for New Zealand exports continues to be a feature of trade data.” She continued, “we expect this to flow through the broader New Zealand economy in a myriad of ways over the coming year, including via a boost to consumption and investment spending.”
Business confidence hit a 20-year high in January at 70.8, up from 64.1 in December, according to the ANZ Business Outlook survey. Businesses are seeing a pickup in activity, rising from 53.5 to 58.5 percent. Expected profitability jumped to 44.6 percent from 39.7. According to ANZ Bank of New Zealand’s chief economist Cameron Bagrie, “that’ll be good enough to propel New Zealand to the Top of the Pops – topping the OECD growth stakes – so-called ‘Rock Star’ status.”
There is also an increasing expectation that the Reserve Bank of New Zealand will increase rates, but this could be baked into the currency already. The question maybe traders are trying to figure out is by how much they will increase. Survey results show a 32.9 percent of businesses expect to increase prices.
The daily chart of NZDUSD has price action closing near the confirmed supply zone after a bounce of the layered 20, 50 and 72 EMAs. Resistance with be within the zone boundaries at .8375 and .8430. A break above this zone will be rather bullish. Price action support will be found at .8330 before getting to the series of EMAs. A breakout of the supply zone could foster enough momentum to surpass .8490 and head to .8550.
If NZDUSD falls out of favor and break through the moving averages, price action will likely be sent to .8216, or the 200 EMA. However, this is unlikely to be seen in the coming week.
The weekly chart shows prices consolidate, relative to previous historical prices. The weekly candle was rejected at the top of the channel resistance, but a close above this level will strengthen the case for kiwi to reach into the 85 cent-level per dollar. Conversely, if the kiwi falls, support is seen in the mid- to lower 82 cent-level.