Kiwi Review_14-18 November 2016

Summary
The New Zealand had some vital data to its economy this past week after a 7.8 magnitude earthquake hit the country on the 14th of November. We didn’t really see much market reaction to this after that. It was noted by New Zealand’s finance minister, Bill English, that the earthquake could dent growth this quarter and the first quarter of 2017. The Kiwi has been steadily appreciating over its crosses as economic data remains supportive. The weakness we saw against the U.S dollar was due to the effect of a strong greenback. It still remains susceptible to further weakness against the USD as the Fed Watch Tool markets are currently pricing in a 95.4% chance of a rate hike.

Global Dairy Trade
Dairy prices continued to rise at this week’s Global Dairy Trade auction. Overall prices were up 4.5% with prices higher for all dairy products. The key determinant of Fonterra’s farm gate milk price, whole milk powder, rose further to its highest level since mid-2014 to $3423/tonne. A 3.2% increase in price. High prices are not only a result of a tighter supply, but a firmer demand too. Again at this week’s auction there was a strong buying interest from china. Volumes sold at this past week’s auction were down by 14% from the auction a fortnight before. Supply has continued to decline due to wet weather and this is expected to continue over the next two month. Even with rising prices, which I think it makes sense for farmers to be looking for ways to increase their production, a worse than Fonterra’s predicted 7% decline is eyed over a couple of months.

Retail sales
As I stated in my forecast, that I expect a higher than expected number on both the Quarter-over-Quarter and Year-over-Year retail sales. A 0.9% increase was seen during the third quarter, though with a 0.9% decline from last year’s third quarter as this year’s came in at 5.1%. Strength in spending is steadily increasing and expected to be sustained this quarter. Low inflation is one of the main reasons why we seeing a surge in consumer spending. This allows household incomes to stretch a little bit further.

NzdJpy
The Japanese Yen remained weak this week against the kiwi. We didn’t have much vital economic data coming from japan this week. Japanese Yen look to the Bank of Japan to guide near-term moves in the Yen, and this is especially true as the recent global bond market sell-off has pushed Japanese Government Bond yields to the BoJ’s stated ceilings. In September BoJ Governor Haruhiko Kuroda and his staff announced the bank would purchase unlimited amounts of JGB’s in order to control rates.

NzdUsd
According to the Commitment of Traders report that still dates back to the 15th of November, the net noncommercial position was above the waterline, just above zero. This shows a bearish sentiment. I expect the net noncommercial positions to be way above the waterline as we saw some more bearishness with the pair this past week. A decrease in both short and long noncommercial as price closed off low. This week’s economic data from New Zealand didn’t really strengthen the kiwi against a strong greenback.

AudNzd
The Australian dollar got hammered this week after a disappointing labor market data. The country’s economy only added 9.8k jobs, far less than the 16k that was projected by economists. Furthermore, September’s net job loss was revised to a whopping 29k from the initially reported 9.8k drawdown. The currency fell alongside front-end bond yields, suggesting the results nudged the priced-in RBA outlook toward the dovish side along of the policy spectrum.

GbpNzd

With the U.K budget statement due on the 23rd of November, this past week’s economic data helped prop up the pound against most of its peers. The Bank of England’s (BoE) expectation as the marked depreciation in the exchange rate is expected to fuel ‘inflation overshoot, and HM Treasury may be unable to deliver a material fiscal stimulus package amid the growing budget deficit.

EurNzd
The kiwi has been performing relatively well against the Euro. Strength both currencies saw strength this past week and that resulted in week-long range. The markets continue to price in no ECB rate cut this year, with a 0% chance of a rate hike next month. If ECB President, Draghi, does offer insight into the ECB’s next steps, we will be focused on hearing what they intend to do with their capital key and deposit threshold requirements.

NzdJpy H4 Chart

The yen continued to plummet for the second consecutive week. Price opened at the weekly pivot point. The immediate resistance level of 76.89 was broken and a retest price then retested it at the role reversal. Price closed off at the resistance level of 77.771.

NzdUsd H4 Chart

Having closed off weak the previous week, price opened at a level of support @ 0.70880. Strength from the US dollar saw a bearish continuation for the pair as it continued on the downside with a series of lower lows and lower highs through a descending channel.

AudNzd H4 Chart

Price opened @ 1.06382 at the beginning of the week with immediate resistance at 1.06550. It failed to beak this level on two occasions. It then broke a psych-support level of 1.06000 closing off the week at a key support level of 1.0450.

GbpNzd H4 Chart

Price opened at 1.7553 at the beginning of the week. Having broken the upside of a descending channel the market was moving through the previous week, this past week we saw it ranging between a support level of 1.74309 and resistance level of 1.7700.

EurNzd H4 Chart

Price opened at 1.51508 at the beginning of the week. It has been trading through a descending channel since early October. This past week we saw less bulls coming in to play as they decreased over the course of the week. A break on the downside through the immediate support level of 1.50428,that has been holding, is eminent. Price closed off the week at 1.50977.

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