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New Zealand Dollar Forecast: NZD/USD Trades Cautiously Ahead of Q2 GDP Data

New Zealand Dollar Forecast: NZD/USD Trades Cautiously Ahead of Q2 GDP Data

Thomas Westwater, Analyst

New Zealand Dollar, NZD/USD, Q2 GDP, Covid, RBA – Talking Points

  • New Zealand Dollar in focus ahead of Q2 GDP growth data
  • RBA Governor Philip Lowe set to speak on economy today
  • NZD/USD trades at 200-day SMA within a Bull Pennant

Tuesday’s Asia-Pacific Forecast

The risk-sensitive New Zealand Dollar is trading slightly lower against the US Dollar as traders cautiously dip their feet back into a risk-on stance following last week’s volatility. Monday saw APAC equity indexes finish mostly higher, although gains were small. Wall Street traded higher on Monday, with the benchmark S&P 500 closing 0.23% higher. Growth-sensitive technology stocks lagged, however.

Kiwi Dollar traders are preparing for New Zealand’s second-quarter gross domestic product to cross the wires later this week. Analysts expect Q2 growth to accelerate to 16.3% on a year-over-year basis, according to a Bloomberg survey. That compares to just 2.4% y/y in Q1. This may help drive NZD/USD higher if those expectations are met or exceeded.

The Reserve Bank of New Zealand (RBNZ) is set to meet early next month when rate traders largely expect a 25 basis point hike to the official cash rate (OCR). Domestic government bond yields have risen in recent weeks as traders priced in a higher chance for a rate hike. While the Delta variant continues to pose risks, cited by the majority of central banks, New Zealand has had relatively high success in containing outbreaks.

Prime Minister Jacinda Ardern announced earlier this week that the country will move down to a level 2 lockdown Tuesday. This excludes Auckland, however, which will keep the level 4 restrictions in place for another week. The move signals that policymakers are confident in the progress made so far and gives the Kiwi economy a green light to move forward.

Elsewhere, Reserve Bank Governor Philip Lowe will speak today in an online presentation to the ANIKA Foundation. The Australian Dollar has benefited from the pullback in risk aversion this week, and traders are eying the August jobs report due out on Thursday. Analysts expect a loss of 90k jobs. Lockdowns across New South Wales and Victoria have dragged on growth and labor market forecasts amid the Delta variant surge.

NZD/USD Technical Forecast

NZD/USD is trading directly below the 200-day Simple Moving Average (SMA) after several days of modest gains. The currency pair has formed a Bull Pennant chart pattern over the past two weeks, and is currently trading at support. Breaking above the 200-day SMA could put prices on course for a potential breakout from the patter, as it implies a bullish bias.

NZD/USD Daily Chart

nzdusd bull pennant

Chart created with TradingView

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

To contact Thomas, use the comments section below or @FxWestwateron Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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