The New Zealand dollar continues to find traction in the global market place as the USD struggles to gain and as economic conditions give of a mixed signal for the NZ economy. Recent data from the Global Dairy Trade Index show a rise of 12.7% (6.6% prior) which will be welcome news to the primary industry based economy. After a spate of recent low returns and falling dairy prices this will be welcome news as the dairy industry is the number one export for the NZ economy. This comes at an interesting time as the RBNZ has recently cut interest rates as well in attempt to help the economy and cause the dollar to shift lower. It will now be interesting to see how the market not only reacts to the dairy boost, but if expectations around inflation also start to lift, which is something the RBNZ has been keen to see and criticized on recently.
The NZDUSD continues to be a big trade for many, and it’s not expectation with all the volatility as of late in the marketplace. Once again the NZDUSD has pushed up and just come up short before resistance at 0.7311 and we may continue to see the market look to push harder on the charts. Recent drops have also lacked momentum and support at 0.7163, has so far looked lacklustre when it comes to volatility and bearish aggression. For myself the trend is still your friend and with the 20 day and 50 day moving average all giving of bullish signals it may be a case of seeing how high the NZDUSD can run in the short term, before markets get a little spooked and look to take profit.
The EURUSD continues to find traction on the charts despite the Brexit shock that sent waves across the markets. German economic sentiment was low as it came in at 0.5 (exp 1.9), but at the same time this was a large lift after the previous reading of -6.8. I would expect this to continue to rise as markets stabilise regarding the Brexit and the shock factor wears off and it becomes a negotiation process that markets will have to wait for two years for. US core CPI has also had an impact on the EURUSD today as it came in weaker than expected (0.1% m/m) giving a boost to the Euro against the dollar. The US CPI data will be a little concerning for the FED as it looks to boost inflation in the medium to long term.
For the EURUSD it was the bulls that took charge, but they were pushed back sharply at the trend line on the daily chart which has been in play for a number of months; first acting to support the bulls against the bears and now stopping bullish momentum getting out of control. I would expect that this trend will continue to act as resistance for bullish movements higher, but in the event of breakthrough it could also return to acting as dynamic support. Support however for further falls can be found at 1.1154 but is looking unlikely unless we see a strong showing of data from the USA.