Key Points:
- FFR decision is largely priced in.
- Technical bias remains bullish.
- A strong GDP result likely key to a strong rally.
The kiwi dollar managed to move modestly higher, despite the presence of some rather large swings in sentiment throughout the week. Oddly enough, the two sessions that netted the greatest gains were Monday and Wednesday which saw some major upticks in the US data. Looking ahead, the NZ GDP data will be in focus this week and the bulls will likely need the numbers to come in above expectations if they want to take full control of the pair, especially in the wake of the Australian figures.
The kiwi dollar reacted strongly to the swings in sentiment besetting the USD last week, racking up some sizable gains in the wake of the Trump phone call drama. By and large, the overarching uptick in negative sentiment towards the USD offset the stronger US Non-Manufacturing and JOLTS Jobs data and this saw the kiwi thrive. What’s more, a 3.5% surge in the GDT Price index left the NZD with a good foothold from which to capitalise on the variable mood of the market. Ultimately however, due to a Michigan Consumer Sentiment result of 98.0, much of this ground was reclaimed by the USD as the week closed.
Looking at the technical data now and the pair might have a little more downside potential in the early stages of the week but the ascending trend line should cap losses or even encourage another rally. Additionally, the ADX continues to gather momentum whilst the 12 and 20 day EMA’s remain in a fairly bullish configuration which should help to keep buying pressure high moving forward. Finally, the Parabolic SAR reading is some way off having an inversion which could mean the uptrend remains in play for some time.
As for the impending week, the key news items that will be generating some movement will be the Federal Funds Rate announcement and the NZ GDP data. Whilst the FFR is expected to be increased, much of this has already been priced in by the market which could mute the effect of the rate hike this time around. As for the GDP data, the numbers could be more impactful than usual given that the nation’s largest trading partner, Australia, recently posted a contraction for the prior quarter.
Ultimately, the kiwi should remain relatively bullish this week even if the Fed does hike rates. However, do keep an eye out for any unexpected slips as the NZD could sharply lower if it breaks though that ascending trend line.