New Zealand Dollar Outlook: NZD/USD Breaks Higher from Wedge Pattern

New Zealand Dollar, NZD/USD, consumer confidence, Building Permits, Covid - Talking Points

• Asia-Pacific region eyes a bright close to the week, Chinese stocks remain lower
• New Zealand economic prints shows mixed set of data for June and July
• NZD/USD rises above resistance from a Falling Wedge chart pattern

Friday’s Asia-Pacific Outlook

Asia Pacific markets may trade Friday on a brighter note after an upbeat Wall Street session saw gains across the major indexes. The benchmark S&P 500 rose to a fresh record high. The risk-on atmosphere dragged on the safe-haven US Dollar, while the risk-sensitive New Zealand Dollar gained against major currencies. Sentiment across Chinese stocks still remains lackluster despite a rebound from deeper losses this week.

The second-quarter US gross domestic product (GDP) crossed the wire at 6.5% overnight, missing expectations of 8.5% on a q/q basis. That, along with this week’s dovish Fed language, may be responsible for much of the weakness in the Greenback. It is also likely helping to calm fears over an accelerated taper timeline in the United States.

New Zealand’s ANZ Roy Morgan consumer confidence for July was released this morning, showing a decline from the prior month. The figure hit the wires at 113.1, down from 114 in June. Building permits also printed at 3.8% from May’s -2.8% outcome. Overall, the data shows a mixed picture for the Kiwi economy. Later today, Japan will report unemployment and retail sales for June.

Meanwhile, the Asia Pacific region continues to struggle with rising Covid cases, which have caused a series of lockdowns across key economies. Australia’s state of New South Wales (NSW) saw a record 239 cases reported on Thursday. The lockdown may last until September and possibly later in the year, according to health policy experts. That may translate into a contraction in growth for the third quarter.

NZD/USD Technical Outlook:

The New Zealand Dollar’s recent strength against the US Dollar has the currency pair trading above a descending trendline that forms the upper bound of a Falling Wedge pattern. This may see prices rise further as the pattern typically results in potential breakouts. Along with positive RSI divergence, the short-term outlook appears bullish. Still, a pullback to retest resistance may occur.

NZD/USD8-Hour Chart

Chart created with TradingView

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--- Written by Thomas Westwater, Analyst for DailyFX.com

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