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NZD Facing Concerns, USD Backed By Fed Statements -

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    • NZD Facing Concerns, USD Backed By Fed Statements
May, 13th 12:31

NZD/USD posted small gains yesterday following the release of a mixed bag of data. The New Zealand Business NZ Manufacturing Index in April improved to 56.6 points from 54.7 the previous month, its highest monthly rise since January. However, the Food Price Index softened to 0.3% in April as the national economy continues to struggle with low inflation levels.

The RBNZ released its Financial Stability Report earlier this week, and expressed its concerns that weak global growth, low dairy prices and high house prices posed risks to the New Zealand economy. The soft global economy continues to take a toll on the New Zealand export sector. Inflation is currently at 0.4%, well short of the Bank’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns about the pace of price growth in the housing market.
In comparison, the US dollar hit a two-week high against a basket of currencies on friday, posting its best fortnightly performance since February. The dollar index .DXY, which measures the greenback against six major rivals, rose 0.2 percent to 94.442its strongest since April 28.

This uptrend is supported by the view that the U.S. Federal Reserve is still on track to raise rates before any other major central bank. Boston Federal Reserve President Eric Rosengren on Thursday said that the Fed should raise interest rates if data confirmed a stronger jobs market and inflation outlook in the second quarter.

Today, investors await US retail sales, inflation and consumer confidence reports, that are on the schedule. These upcoming reports will be major factors as the Fed must decide whether to press the rate trigger in June. The minutes of the April Fed meeting will be released next week, and any clues about a June hike could send the dollar higher against its rivals.

NZDUSD

Fig. NZDUSD D1 Technical Chart

Today NZD/USD ended its two-day up move and is currently ticking down to 0.66613. RSI (14) hovers below the average at 45.36, suggesting that the bearish trend has not been confirmed yet. A red SAR arrow has appeared over the price line, signaling that a short position is desirable at the moment.

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