NZD supported ahead of US employment
By Garry Dean (Sales Trader, CMC Markets New Zealand)
The New Zealand dollar’s surge to a fresh 2 ½ year high of 0.8698 on Friday looked a little extended, with technical
indicators suggesting recent upward momentum was flagging, and a short-term retracement was likely. NZ business
confidence figures released yesterday showed a drop in March from the 20-year high recorded in February, and overnight
the NZD has found solid support at 0.8640. The remainder of the week sees policy meetings from the RBA and ECB, with US
Non- Farm Payrolls on Friday expected to show an additional 200,000 jobs created in March.
The prospect of a stimulus package out of China continues to support commodity currencies, with recent comments from
Chinese Premier Li Keqiang fuelling expectations. Dovish comments from US Fed Chairman Janet Yellen overnight have
clouded the perception that interest rates may start to rise within six months of the end of QE tapering. She said
“extraordinary commitment” from the Fed “is still needed, and will be for some time”. This has weighed on the USD, and
if rising US interest rates becomes less certain, the prospect of a weaker USD will provide an additional boost for the
NZD going forward.
The RBA Board meeting today is widely expected to see the cash rate remain unchanged at 2.50%, but the focus will be on
the ECB meeting Thursday.
Overnight the Eurozone flash CPI reading fell to its lowest level in four years, so the ECB will remain under pressure
to take action. Friday’s US employment numbers will be crucial, particularly in light of Yellen’s comments overnight.
Overall the NZD continues to look well supported, with a break of 0.8700 opening up the prospect of a retest of the
0.8845 high seen in July 2011.
Ends