Overview and Dynamics
Although released at the beginning of the trading day on Friday inflation data for New Zealand in the 3rd quarter was slightly above expectations (consumer price index (CPI) rose to 0.3% compared with the previous quarter, which grew by 0.4% the first quarter, and by 0.4% compared to the same period of the previous year), the pair NZD / USD fell by suspending its almost nonstop growth from the beginning of the month. Then the pair began to rise sharply after the release of disappointing data on the financial markets of the US labor market in September. However, today's figures of the quarterly CPI failed to convince market participants in a stable growth of inflation in the country. Inflation is nearly zero.
The current month the pair based on 3 pillars, so to speak. It is - to reduce almost to zero the expectations of market participants that the Federal Reserve on the background of the incoming negative data will not raise rates in the United States in October, expectations that the RBNZ, in turn, will reduce the interest rate in New Zealand, who grew up world prices for dairy products , whose exports account for 25% of all New Zealand's exports, directly affecting the budget of the country. Recall that the New Zealand company Fonterra, which produces one-third of the total milk production in the world, even in late September, raised its forecast payout to its shareholders farmers due to rising world prices for dairy products.
However, the head of the RBNZ Graeme Wheeler, speaking earlier in the week, said
increased concerns about the situation in the housing market of the country, but also said that the central bank has room to lower interest rates in the event of a significant slowdown in the global economy.
Back in September, Wheeler said that the RBNZ is ready to go for another interest rate cut in New Zealand. Two days ago, he also said he did not rule out the possibility of returning to the country's budget deficit in 2016. The growing trade deficit (trade balance in August -1.035 billion New Zealand dollars against the forecast of -850 000 000 in annual terms -3.331 billion New Zealand dollars against the forecast of -3.07 billion) against the backdrop of a slowing economy the largest trading partner of China, reducing Chinese imports of New Zealand, the slowdown in GDP growth in Q2 may cause the RBNZ to go for another interest rate cut in New Zealand later this year.
In the context of global economic slowdown the Fed can keep its key interest rate in the US at the same level over the next few months. And New Zealand's export-oriented economy needs more cheap New Zealand dollar.
From the news today are waiting for data from the US from 16:15 to 23:00 (GMT + 3), the most important of which will be data on industrial production for September (16:15) and the index of consumer confidence (17:00) from the Reuters / Michigan October. According to the forecast expected data better than in the previous period. When confirming the forecast of the US dollar will rise.
From a technical point of view, the pair NZD / USD, which is located to open short positions, rising to corrective gains from the lows of the year to a level of 0.6230 Fibonacci 23.6% at 0.6860. Just below the 0.6835 mark is located on another level of resistance (EMA144 on the daily chart). Here, the upper limit of the downward channel on the weekly chart.
Since the beginning of the month the pair was able to consolidate 500 points, 2.5 times blocked the volatility of the previous month and returning to the June prices.
The next meeting of the RBNZ rate, as well as the Fed will take place on 28 October.
And, most likely, until that time the pair NZD / USD is unlikely to rise above the levels achieved, while having considerable space to reduce the current downtrend.
While the weekly chart indicators OsMA and Stochastic recommend buying on the 4-hour and daily chart - short positions.
The main trend of the current pair NZD / USD, while it is below the level 0.6835 (EMA144), 0.7000 (EMA200 on the daily chart) remains downward.
Sell Limit 0.6860, 0.6835. Sell Stop 0.6790. Stop-Loss 0.6910. Take-Profit 0.6710, 0.6690, 0.6650, 0.6550
Buy Stop 0.6920. Sell Stop 0.6850. Take-Profit 0.6990, 0.7020