The dominant fundamental picture is unlikely to be significantly altered by anything set for release on this week’s economic calendar. New Zealand dollar price action will be dominated by technical considerations. Friday’s close produced a large Bearish Engulfing pattern, suggesting the corrective rally is now over and the downtrend ready to resume.
[B]Fundamental Outlook For New Zealand Dollar: Bearish[/B]
- New Zealand Producer Prices Higher in the Second Quarter on Record Energy Costs
- NZ Performance of Services Index Sees Improvement on Rate Cut Expectations
The dominant fundamental picture is unlikely to be significantly altered by anything set for release on this week’s economic calendar. The trade deficit will likely continue to narrow as acute slowdown in New Zealand’s economy curbs spending and weighs down import volumes. The Reserve Bank of New Zealand’s 2-year Inflation Expectation may reflect easing price pressures on forecasts of slowing global growth and cheaper crude oil. On balance, the release is not likely to be market-moving as broad rate cuts of nearly 150 basis points are priced in for the next 12 months. Indeed, the expectations of these very rate cuts may see NBNZ Business Confidence correct a bit higher in August having registered at -43.2 in July.
With the broad fundamental outlook firmly in place, New Zealand dollar price action will be dominated by technical considerations. Last week saw NZDUSD move higher moved higher as the US dollar retraced recent gains against all of the major pairs. Thursday trading saw price action close just below support-turned-resistance at the lower boundary of a channel that had guided price action since mid-March until the most recent breakout on 08/04. Prices bounced lower from resistance in Asian and early European trading to take NZDUSD back down to 0.7150, the 76.4% Fibonacci retracement of the 03/14-08/13 selloff. Friday’s close produced a large Bearish Engulfing pattern, suggesting the corrective rally is now over and the downtrend ready to resume