Daily Economic Commentary: New Zealand

[ForexGump]

Great day yesterday for bullish NZD traders, as the NZD skyrocketed against the USD as risk appetite continued to push commodity currencies higher. The NZDUSD pair closed 150 pips higher, finishing the trading day at .6502.

New Zealand’s quarterly CPI report indicated that consumer prices rose by 0.6% from the first quarter to the second quarter of this year, which was slightly higher than the forecasted 0.5% increase. Still, the inflation rate stands at 1.9% in the year through June 30. RBNZ Governor Alan Bollard expects this to hit just 0.7% by the end of the current quarter.

With no other data coming out this week, risk sentiment will most probably continue to drive the markets. Be cautious on any changes in sentiment that can alter price action.

[ForexGump]

Although the NZD/USD started the day with a dive towards the 0.6400 level, tides turned later on as the pair recovered back to 0.6500. Despite the surge of risk appetite yesterday, it was unable to make any further advances due to Fitch's surprise cut of the nation's economic outlook.

Rating agency Fitch expressed its concern about New Zealand's large current account deficit. The agency downgraded their outlook for the nation's economy from stable to negative, which exposes New Zealand to the danger of a credit rating downgrade. This announcement came as a surprise especially since RBNZ Governor Alan Bollard expects New Zealand to be ahead of the pack in terms of economic recovery.

Nonetheless, the improvement in risk appetite allowed the NZD/USD to keep its head above water as it lingers above 0.6400. No economic reports are on the agenda for today but potential sentiment-shifting news may come in the form of earnings reports from the US. Could the NZD/USD count on risk appetite for another day?

[ForexGump]

What goes up must come down. That’s exactly the case with NZD last Friday as it found itself shortchanged against all the other major currencies to end the week. The NZD started the week hot due to increased risk appetite in the US but it eventually got fatigued during the last leg. Nonetheless, the NZD was still able to close the week positively against USD and JPY despite shedding some of its lead at the finish line.

No top tier economic reports are due today in 'Maoriland.' The NZD may once again be driven by sentiment in the US market for the rest of the week. However, no big time economic updates are also scheduled in the US today. For this reason, trading of the NZD may just be light.

[ForexGump]

Slow down Kiwi, slow down! After making a strong push the day before, the NZD gave back some of its gains as news from the US helped put a pause on the recent increase in risk tolerance. The NZDUSD pair closed lower, at .6537.

It’s going to be pretty quiet for the rest of the week, as no economic reports are scheduled for release. Watch out for more shifts in risk sentiment and news concerning commodities, as these are the factors that have been causing the NZD to move as of late.

[ForexGump]

The NZD/USD edged a bit higher yesterday as it made its way slightly above the 0.6600 mark. The lack of economic reports from New Zealand suggest that risk tolerance has a lingering presence in the currency market.

The Kiwi might continue cruising in its current range, with support at 0.6530 and resistance at the previous high of 0.6630. New Zealand's economic calendar is quiet for the remainder of the week, which leaves the NZD/USD vulnerable to sentiment changes brought about by US economic reports. US weekly jobless claims are expected to be slightly higher than last week, which means that risk aversion could make a sudden comeback and drive the NZD/USD lower.

[ForexGump]

‘Gatorade-d’ by risk appetite, the NZD continued its rise over the JPY in yesterday’s trading. The NZD/JPY pair has been on an uptrend since July 13. Being on an uptrend provided two profit opportunities for traders – from capital gains and interest rate differentials. Note that the NZD’s interest rate is pegged at 2.5% while the JPY only has 0.1%.

No economic reports were due yesterday in New Zealand. Today will likewise be quite in terms of economic reports. The NZD’s main driver would be none other than risk tolerance in the US capitals markets. Further risk appetite would support its rise and the short term carry trade strategy over the JPY.