Kiwi Dollar Could Be Under Pressure In The Week Ahead

Key Points:

  • NZD facing looming spectre of NFP result.
  • Watch for an NZD depreciation late in the week.
  • 0.7000 and 0.6962 key support zones likely to be in focus.

The venerable Kiwi dollar has had a relatively strong start to the week but remains vulnerable to the threat of increasing greenback sentiment. Subsequently, as the pair continues to hold on above the 70 cent handle, it makes sense to take a look at last week’s events and what could potentially be looming upon the horizon.

The NZD had some strong swings during the preceding week, the majority of the movement occurring on the Monday and Wednesday sessions. On Monday, a 10.2% uptick in NZ Credit Card Spending saw the pair stage a solid recovery. Unfortunately this buoyancy was not to last as a subsequent 1.0% increase in the US Core Durable Goods Orders sent the Kiwi dollar back to where it opened the week. However, all was not lost and Fridayʼs weaker US data saw the NZD have a modest rally, keeping the pair around the central tendency of its near-term ranging phase.

As for the impending week, there is a plethora of economic news items on offer and we could have further volatility on the horizon as a result. Namely, on the US side of things, the Preliminary GDP, Beige Book, Non-Farm Employment Change, and Unemployment Rate figures are all due out. Additionally, on the NZ front, we have the ANZ Business Confidence and Visitor Arrivals results to look forward to which could result in some strong buying and selling pressures depending on the outcomes.

Looking at the technical data now, we are likely to see the Kiwi dollar come under fire early on in the proceedings but support should hold firm, meaning that the outlook is neutral once again this week. Any initial bearishness will be the result of the EMA configuration and similarly bearish Parabolic SAR readings. However, in the absence of some impactful fundamentals, these alone are unlikely to push the pair below the 0.6962 level of support which the NZD has been reluctant to test seriously. Speaking of support, it will be at its strongest at the 0.6962,0.6873, and 0.6806 levels. Resistance on the other hand will be in place around the 0.7062, 0.7150, and 0.7270 levels.

Ultimately, the fate of the New Zealand dollar is likely to rest with the US Non-Farm Payroll outcome later in the week. A strong NFP result is likely to again shift sentiment back towards the greenback as the market moves to get ahead of the Fed on rate hikes. Fundamentally, this is likely to remain a negative event for the NZD as there is little way to foresee any benefit for a result that either meets or exceeds the estimate target. Subsequently, watch for plenty of volatility during the event along with a potential NZD depreciation.

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