Key Points:
- Bullish EMA bias.
- Neutral RSI readings.
- Parabolic SAR remains indicative of an uptrend.
The Kiwi Dollar behaved rather erratically last week, rallying strongly despite both a contraction in the New Zealand Home Sales result and a cut to the OCR. However, equally strangely, the pair began to sink lower in subsequent sessions despite some rather sizable upticks in the New Zealand Retail sales data. As for this week, the pair will be looking to the GDT Price Index and the NZ Unemployment rate to help a bias to form.
The Kiwi Dollar climbed higher in the first half of last week and, most notably, on Wednesday the pair sought to challenge the 0.7305 resistance level. The strong surge in buying pressure came as somewhat of a surprise, especially given the fact that the RBNZ elected to cut the OCR to 2.00%. Consequently, the uptick in NZD strength was largely attributed to the market pricing in a deeper cut than the 25bps one which was delivered. However, the pair did eventually cede some of its gains, although this too was met with some raised eyebrows. Specifically, the second half of the week saw the NZ Retail Sales data come in significantly above expectations at 2.3% q/q.
From a technical perspective, the NZD/USD appears to have a slight bullish bias going forward this week. On the daily chart, the EMA activity remains firmly in a bullish configuration which could help the pair to rally as the trading week kicks off. Additionally, the Parabolic SAR reading is still signalling that the Kiwi Dollar is in an uptrend. Also, the relatively flat RSI means that significant upside potential exists for the NZD.
Moreover, the tumble which was seen on Friday has now brought the pair into contact with the downside constraint of the pair’s bullish channel. Consequently, there is unlikely to be a serious chance of a breakout to the downside in the absence of a fundamental shock. However, also as a result of the channel, the NZD is unlikely to push through the 0.7285 level even with buoyancy being supplied by strong fundamental data.
Speaking of fundamentals, the GDT Price Index is due this week which will play its usual role in influencing the NZDUSD. If another strong result is posted, such as the previous 6.6% figure, this could reignite the swell in positive sentiment which was seen last week. Additionally, the NZ Unemployment data is due out in the coming days which could likewise see the pair perform strongly if it shows some tangible improvement.
Ultimately, despite its recent erratic behaviour, the Kiwi Dollar looks fairly set to remain on course for another bullish week. As discussed, the technical bias remains tilted in favour of a continued uptrend which could see the 0.7285 mark tested. However, it remains worth noting, any ongoing rallies will largely be predicated on a strong showing in the GDT Price Index result. Consequently, keep a close eye on the announcement as the market will be sure to react quickly to the outcome.