Many economists regard the NZD to be a general indicator of the world economy the reason being it is a purely producing and competitive economy. Whatever the data released here has a cascading effect on other Pacific economies and reveals their true health. Today’s NZIER business confidence showed a considerable drop from previous 15 to 2 with about 1% of businesses expecting a deteriorating economy in the next 6 months and a slowdown in sales demand-this being the lowest pessimism from businesses since 2011. With this data, we expect the NZD to lose ground in the long term and the RBNZ will surely have to cut interest rates further to the 2.0 levels as the year progresses.
Let’s look at the charts:
Daily Chart Analysis
There is a strong price rejection in the 0.69 regions and now the prices are trending lower and broke below 0.68 regions during the Asian Session. Perhaps this was due to news released just before this session showing declining business confidence in all sectors of the economy-from 15 to 2. The Stochastics and OBV are synchronous in that both are at a negative gradient and reducing volumes and momentum from the overbought regions and away from the 5 month resistance line.
Today the RBA decided to maintain interest rates at 2.00 at the backdrop of reduced Trade balance from -3.16B to -3.41B a number which shows a considerable drop from the projected -2.55B. As these two economies are related, the NZD declined at this news during the Asian session. Other news today will be the ISM Non Manufacturing PMI from the US at 2PM GMT+3 and GDT Price Index from New Zealand to be released at a tentative time-it usually released somewhere around 2PM-3PM GMT+3 from experience.
4HR Chart Analysis
At this time frame, this pair is trending at a rising channel and right about now, it is almost at the support channel and with this strong momentum, it is likely that the support will be broken. This is from the behavior of the candle sticks hugging the lower BB and the momentum and volume is strongly falling from the overbought regions. Last week’s highs above the 0.69 now appear as a false breakout though we shall have to wait and follow the price.
We will watch all the economic news today from the US as they influence employment and inflation in one way or the other and then the GDT Price index from New Zealand.
15 Min Chart Analysis
The price action is now trending at the 161.8 levels of the Fibonacci extension. The price will probably rise to the 100 or 62.8 levels before resuming the downwards trend but we shall only initiate a sell when indicator combination signals so from the overbought areas.
In the New York session we shall wait for the ISM Non Manufacturing PMI from the US at 2PM GMT+3 where non manufacturing industry is expected to expand to 54.1 from 53.4 showing market confidence. Also closely watch the Jolts Job Openings to be released at the same time where job openings is projected to have rose in the previous month from 5.54M to 5.57M. GDT Price index will be released at a tentative time.
Verdict: Sell at all highs.