During the Asian trading session on Monday, NZDUSD continued to rise and refreshed the highest level seen last month at 0.7337. So far this year, the currency has posted an increase of more than 3%. On the whole, the launch of the vaccine boosted market expectations of the economy quickly returning to normal levels and drove the strengthening of commodity currencies including the New Zealand Dollar.
In addition, thanks to the timely implementation of emergency measures by the New Zealand government which curbed the spread of the pandemic, the country’s economic growth rate has been ahead of many countries in the world. In December last year, New Zealand announced a 14% year-on-year rebound in GDP for the third quarter of 2020, far exceeding the previous value of -11.0% (pre-revision -12.2%). The increase is also the country’s largest quarterly increase in history. In addition, in the three months ending in September 2020, the annual GDP rate of New Zealand recorded a strong rebound to 0.4% from the previous value of -12.4%. In terms of employment, the unemployment rate for the fourth quarter of 2020 announced earlier this month dropped to 4.9% from the previous value of 5.3%. The market’s optimism about economic changes can also be seen in consumer and business confidence indexes. The latest data shows that the consumer confidence index rebounded to 106.0 from the December low of 95.1, while the business confidence index also recorded 9.4, which was the first positive value since 2017.
On Wednesday, the market will usher in the New Zealand Fed interest rate decision announcement . Given that New Zealand’s inflation rate is still low, the market expects that the Reserve Bank of New Zealand will maintain a loose monetary policy and maintain interest rates unchanged at 0.25%. Although the newly announced annual rate of inflation in New Zealand was recorded at 1.4% and performed better than market expectations of 1.0%, the performance of this data is still the worst since the first quarter of 2018. This shows that the New Zealand economy still needs continuous monetary and fiscal policy support.
Earlier, the central bank officials emphasized the commitment of the Reserve Bank of New Zealand to keep interest rates unchanged until March 2021 and maintain the current forward guidance. Later, the New Zealand Federal Reserve Chairman Orr will hold a press conference and deliver a speech. The chairman is expected to express his views on New Zealand’s economic growth, employment and inflation, which deserves investors’ attention.
Technical Analysis:
From the weekly chart, the NZDUSD maintains trading above the 78.6 Fibonacci retracement level (0.7110), and currently tests the key resistance of 0.7310 (the same as the 61.8 Fibonacci extension level). MACD formed a dead cross; the Relative Strength Index (RSI) and Stochastics fast lines were at 70 and 80 respectively.
The daily chart displays the NZDUSD on Friday on a broken triangle Resistance area, and currently testing 0.7310 (the same as the 61.8 Fibonacci extension level) Resistance. If the breakthrough is successful, the upper Resistance will continue to focus on the key psychological levels of 0.7400 and 0.7550. If there is a correction in the exchange rate, the lower Support will focus on the triangular trend line, 0.7110 (the same 78.6 Fibonacci retracement level) and the low of 0.7002 from last December.
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Larince Zhang
Market Analyst
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