New Zealand Dollar Forecasts Show NZD at Risk of More Losses
The NZ dollar is under assault on currency markets with the strong declines leading us to question whether the NZD’s time in the sun as an out-performer in global FX is over.
The current rapid moves in the NZD crosses have created some significant technical signals that indicate that momentum is starting to move to the advantage of other major currencies.
We have taken a look at how the pound, euro, US and Australian dollar’s are likely to fare against the antipodean currency in coming days and weeks.
Driving the recent declines were the latest jobs data which showed the unemployment rate came in at 5.8% as opposed to the 5.5% expected while wages grew only at 1.8% versus the 2.0% forecast.
“Taken together with the declining dairy auction prices the data suggests that New Zealand is likely to see a slowdown in growth this year that would allow RBNZ some leeway on easing monetary policy,” says Boris Schlossberg at BK Asset Management.
Before we consider the outlook, a look at the spot markets shows the pound v NZ dollar exchange rate is at 2.0290, the euro v NZD is at 1.5006 and the Australian v New Zealand dollar is at 1.0671.
* All currency quotes mentioned here refer to the wholesale market. Your bank will affix a discretionary spread when transferring money internationally. However, an independent provider will seek to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Please learn more on how this is achieved here.
Against the US dollar the kiwi is tipped by Schlossberg to remain under pressure and could drift towards the .7200 level over the next several weeks.
The move will be aided by the prospect of US labor data continuing to show strength giving markets confidence that the Fed will act by September.
The kiwi has been a major beneficiary of the interest rate spreads between US and New Zealand, attracting strong carry trade flows, and should the spread between the US and NZ decrease the prospect of USD-NZD gains grows.
The Pound v New Zealand Dollar Forecast
The charts are telling us one thing at the present time - momentum lies with the UK currency.
This positive setup shows a complete lag of regard for impending elections and the attached uncertainty that the lack of a clear winner presents.
We note that the GBP-NZD exchange rate is trading above the 20, 50 and 100 day moving averages. Importantly, the break above the 100 day moving average at 2.0062 confirms momentum is positive.
We would prefer to us the location of the 50 day moving averages as an exit point for those looking to buy into the rally.
Should the pound break below here then the upside stance is invalidated, at the time of writing the 50 day moving average resides at 1.9828.
Furthermore, the Momentum (12) indicator rests at 634; well into positive territory.
We would look for advances to be made by the British pound until 2.0600 as this is where the resistance zone that thwarted gains back in January/February lies.
A break above here would be another clear signal that the pound is in a longer-term uptrend against the NZ dollar.
The Euro v New Zealand Dollar Forecast
The EUR-NZD, has like the GBP-NZD, also broken above its 100 day moving average, a solid advocation that momentum has swung behind the shared currency.
The level is located at 1.4750.
Gains towards the significant resistance zone located at 1.54 - 1.56 could now become a possibility while 1.38 - 1.40 should be seen as an exit point to any speculative buys as a test of this level could well confirm the euro has lost the advantage.
The Australian v New Zealand Dollar Forecast
Looking at the AUD-NZD exchange rate, all that talk of parity being achieved is now a distant memory.
The breaking of the 100 day moving average at 1.04 will have been taken by many technical traders as a signal to further advances.
We would also look for a dip below this level at 1.04 that the advance by the Aussie is in danger of stalling once more.
We are already almost testing the 2015 bests located just below 1.08.
The longer-term trend has remained resolutely bearish since November 2014, could we have finally formed a base to the declines?
Risks to the positive AUD-NZD bias would come in the form of the Reserve Bank of Australia surprising markets and issuing another interest rate cut in the next two months.
Such a move would be taken purely with the strength of the Aussie dollar in mind and would put a decisive end to the AUD-NZD advance.
For now though, we see the tide turning for the Kiwi.