Bias
I am a bull on the kiwi
– Fundamentally the New Zealand’s economy is on an increasingly solid footing. With growth and positive signs in household and business sectors and also increasing commodity prices. However, this could be a result of low interest rates.
– Risks are no longer solely to the downside according to a research done by ANZ which provides some data into this.
– Technically the kiwi has been on a year-long uptrend, even though a break on the downside of the uptrend channel is eminent, I’m playing it cool to see how it turns out.

Summary
After such a great week last week, sadly we begin this week with unpleasant news from New Zealand as an earthquake with a magnitude of 7.8 struck with its epicenter being near Christchurch. Unfortunately two casualties have been reported and this has triggered a tsunami warning along the east coast. As to how the markets are going to react to this, I believe that the kiwi is going to slump to the news. Having been the second worst performing currency last week, after japan’s Yen, it dropped more than 3%, what is perceived to be the worst drop in a day in almost 8 years. Keep in mind that New Zealand is better equipped to deal with such natural disasters compared to other island countries like Fiji, Haiti and neighbors. So personally I don’t think it is going to be that bad for the kiwi. The strength in the US dollar and pound will take advantage and we likely to see more kiwi weakness in the coming week. There is also vital data coming out from New Zealand this week. On Monday (14 Nov 2016) we have Retail Sales. a 0.8% increase is eyed. On Tuesday the Global Dairy Trade Price Index. Then on Wednesday we have the Producer Price Index (PPI) input and output data releases. A relatively quiet week, but with what just transpired, we might see different market reactions.

U.S elections
I didn’t dwell much into the U.S elections on my review for the previous week as I believed that New Zealand was not in the immediate firing line. Well, in the short-term, the biggest potential is likely to come from any significant changes in the way the dollar behaves against the kiwi. It’s value is what would have an impact for now. Keep in mind that this will have an effect the cost of imported good. A strong dollar will make things much more expensive for locals and we might see a drop in imports going further. In the long-term I am hoping to see a different Trump in the office as opposed to the one we saw during campaigns. In an economic plan he released in September he mentioned that there will be no Trans-Pacific Partnership even though the congress is reckless enough to pass it. One of the reasons he cited was that, this is hurting American workers and would create employment as he will move most manufacturing jobs back to the US. Remember that one of the reasons why most US companies manufacture their goods outside US is because of the cheaper labor in those countries as opposed to the United States. The US is New Zealand’s third largest export market and trade with the US earns New Zealand over $5 billion a year in products including meat, dairy and wine, and over $2 billion a year in services. A reduction in this level of trade would make a difference to New Zealand’s growth prospects. It is only in January we will be seeing Trump in office and being able to change policies, so until then I don’t think New Zealand is going to have it with Trump as compared to Mexico, China and Japan.
In contrast to that, Most of Trump’s policies are pro-growth and fiscal. They will create inflation for the US. With a rate hike too expected in December, this will flow through to the New Zealand.

Retail Sales
The Year-over-Year change in Retails Sales compares the aggregated sales of retail goods and services during a certain month to the same month a year ago. So last year’s was 6% and with a 5.75% eyed increase I expect the data to come above the expected. We have seen a 3.6% increase in GDP over the year from june 2015 to june 2016 and also increasing consumption that has been stimulated by increasing household wealth and growth in labor incomes. This resulted in Consumer confidence.
I also expect the Quarter-over-Quarter in Retails Sales to come out higher that expected, for the same reasons as above. A 1.2% increase is expected with last quarter’s coming in at 2.3%.

Global Dairy Trade Price Index
Approaching the wet season a shortfall is expected in milk production. To extent, it is unknown, but a short is expected to persist all the way through until the end of the season. With milk prices where they are now, farmers look to increase feed and increase milk production per cow as it is too late to be looking at increasing stock. A fall in dairy prices is expected later in the season.

Producer Price Index
Producer Price Index measures the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. This is somehow parallel to retail sales. A 0.8% outcome is eyed.

For further reading in this regard, Below I provided links to sites and articles I read in compiling this information.
BNZ Retail Sales Report
Trans-Pacific Partnership

NzdUsd Daily Chart

Price is currently on the bottom of of the uptrend. Should it break this trend line drawn by connecting lower picks from 20/01/2016, 30/05/2016 and most recently the 13/10/2016 the next level of support is at 0.70263. That will signal a bearish sentiment moving forward.

NzdUsd H4 Chart

This week we see price opening between the Weekly Pivot and WM2 @ 0.71391. Even though the market sentiment is very bearish, it is interesting to see as to how this will turn out. we currently at support of just above 0.71 for which is a psych level. I expect to see retracement back up to the immediate resistance level of 0.71817 as a retest should it fail to break the current support level.

Price opened on DM2 which acts as a support level too. I expect a retest at the resistance level and a bounce off the 21 Moving average as dynamic resistance should it fail to break the current support level at the first try.

3 thoughts on “Kiwi Weekly forecast_ 14-18 November 2016”

  1. Hadyn S. says:

    Thank you for all your research. Excellent!

    1. Tsholanang Tsholanang says:

      Thank you for the feedback Hadyn

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