Why the New Zealand Dollar Exchange Rate Complex is Winning Today
The NZ dollar has risen after the release of positive employment numbers set aside gloomy sentiment stemming from the worse-than-expected dairy price auction.
The NZD is leading the pack in the G10 currency basket in mid-week trade.
The move higher comes despite news that prices from the GlobalDairyTrade auction fell 7.4% to USD2,276 MT.
Rather, traders have sought to focus on the positive - New Zealand employment rose 0.9% in the final quarter of 2015, this being more than economists had expected.
The unemployment rate fell to 5.3%, a massive beat on the more pessimistic forecast for a reading of 6.1%.
“What is surprising is the marked drop in the unemployment rate. The falling unemployment rate in Q4 was driven by a fall in the participation rate. It is unusual to have the participation rate fall when employment growth itself has been so strong,” says Kim Munday, Economist with ASB.
ASB do not believe there was any strong reason for this fall and, as a result, they expect the participation rate will pick up again in Q1 2016.
Nevertheless, these kinds of numbers traders are betting that the Reserve Bank of New Zealand may stay put on interest rates for the foreseeable future having cut rates in January.
Latest Pound / New Zealand Dollar Exchange Rates
  | Live: 2.3113▼ -0.06%12 Month Best:2.3553 |
*Your Bank's Retail Rate
| 2.2327 - 2.242 |
**Independent Specialist | 2.279 - 2.2882 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
The New Zealand Dollar is Higher
The NZD exchange rate complex is on the move higher thanks to the bullish employment numbers.
The pound to New Zealand dollar exchange rate has fallen from Tuesday’s closing rate at 2.2120 to register 2.1964. Bank transfers are quoted at around 2.1350 and independent providers are seeing quotes just below 2.17.
The New Zealand dollar to US dollar exchange rate is at 0.6569, up from the previous day’s 0.6517.
Dairy Wobbles = New Zealand Dollar Wobbles
The NZD has been exposed to erratic price action over the course of the past 24 hours with an underlying negative bias leading into the employment data.
The currency fell in the wake of news that prices from the GlobalDairyTrade auction fell 7.4% to USD2,276 MT.
Prices for whole milk powder fell 10.4% (USD 1,952), to be down 12% since the start of the year, with cumulative falls of 31% since last October.
“The price action was weak, with the upward sloping curve for WMP now no longer evident. At this stage it is difficult to see an imminent turnaround in prices and it places pressure on Fonterra’s (already downwardly revised) milk price for 2015/16 and will weigh heavily on the opening milk price forecast for 2016/17,” say ANZ Research in a note to clients.
Kiwi's Outlook Subdued as Risk-Off Environment Persists
A ‘risk-off’ tone amongst global traders remains in place with EUR, JPY, USD and GBP strengthening at the expensive of NZD, AUD, CAD.
NZD remained stubbornly anchored, but this could almost certainly change if markets do not improve.
Falling oil prices were once again the catalyst behind recent market moves lower.
Equity indices fell, not helped by weak earnings results from oil companies.
Technical Outlook for the GBP to NZ Dollar
The pound to New Zealand dollar exchange rate has weakened to below key support at 2.2000.
This is probably just a pull-back rather than a resumption of the dominant longer-term down-trend.
The correction is likely to go higher where it will encounter tough resistance in the form of the 50-day MA, 200-week MA and S1 Monthly Pivot at 2.2696.
We would ideally want to see these levels breach before expecting a longer-term recovery to take place, which would be confirmed by a break above of the 2.2800 handle to an initial target at 2.3000.
If the rate breaks below the 2.1689 lows, however, it would confirm more downside to come, to a target at the 2.1512 lows.
USD/NZD Forecast
The kiwi-dollar exchange rate has been consolidating on the S2 Monthly Pivot after breaking down from a corrective a-b-c pattern in the midst of the strong long-term down-trend.
The pair could break either higher or lower – whilst the trend is down and expected to continue, Chaikin Money Flow is showing a bullish convergence with price, possibly indicating an upside breakout.
A move below the shooting star lows at 0.6345 would probably confirm more downside to the 100% extrapolation of the height of the previous move before it broke below the trend-line, at 0.6293.
Alternatively, if Chaikin is right and the current consolidation breaks higher, then a move above the 0.6558 Jan 21 highs, would probably lead to a move up to the 50-day MA at 0.6630.
