Economic fundamentals are unlikely to factor significantly in New Zealand dollar price action this week as the data docket is decidedly uneventful. The pair fell straight downward by a whopping 12% since mid-July, suggesting a meaningful relief rally is in order. Upward momentum will likely challenge the 0.72 level before the downtrend resumes.
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Fundamental Outlook For New Zealand Dollar: Bearish[/B]
- Business NZ Purchasing Manager Index saw sentiment decline at a slower pace in July on expectations of interest rate cuts
- Headline Retail Sales surpass sxpectations in July, but adjusting for inflation yields a decline to the lowest in 13 years
This week’s data docket is decidedly uneventful. Producer prices will likely advance higher, reflecting higher commodity costs in the three months to June. Visitor Arrivals fell -1.4% in June and are likely to continue in the same direction in the following month. Discretionary spending is declining around the world as the global slowdown advances, with leisure likely to be one of the first items on the chopping block as consumers’ priorities shift to weathering the downturn. Similar considerations are likely to see Credit Card Spending continue to slow having printed at an 11-year low in June. With recession at their doorstep, New Zealanders are unlikely to want to take on more debt.
On balance, economic fundamentals are unlikely to factor significantly in New Zealand dollar price action this week. Last week saw the antipodean currency descend to 0.68 against the US dollar. This level is marked by trend line support that has held since September 2001. NZDUSD then bounced sharply higher, ending the week at 0.7054. The pair fell straight downward by a whopping 12% since mid-July, suggesting a meaningful relief rally is in order. Upward momentum will likely challenge the 0.72 level before the downtrend resumes.
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