Trading the News: New Zealand Trade Balance

Updates to New Zealand’s Balance of Payments (BoP) may curb the recent weakness in NZD/USD as the region is anticipated to post a trade surplus of 198M in April.

Image of DailyFX economic calendar

A marked pickup in net exports may heighten the appeal of the New Zealand dollar as it boosts the outlook for growth, and the Reserve Bank of New Zealand (RBNZ) may start to adopt a hawkish tone over the coming months as ‘the recent growth in demand has been delivered by an unprecedented increase in employment.

However, signs of a widening trade deficit may keep NZD/USD under pressure as it encourages the RBNZ to keep the official cash rate (OCR) at the record-low, and Governor Adrian Orr & Co. may continue to buy more time at the next meeting on June 27 as officials ‘expect to keep the OCR at this expansionary level for a considerable period of time.

Impact that New Zealand Trade Balance has had on NZD/USD during the last update

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2018

04/26/2018 22:45:00 GMT

275M

-86M

-1

+22

March 2018 New Zealand Trade Balance

NZD/USD 5-Minute Chart

Image of NZDUSD 5-minute chart

New Zealand unexpectedly posted a trade deficit of NZD 86M in March as imports increased an annualized 14.1% to outpace the 5.8% expansion in foreign demand. Dismal developments coming out of the economy is likely to keep the Reserve Bank of New Zealand (RBNZ) on the sideline as the central bank pledges ‘monetary policy will remain accommodative for a considerable period,’ and the central bank may look to support the economy throughout 2018 as ‘inflation is expected to weaken further in the near term due to softness in food and energy prices and adjustments to government charges.

NZD/USD was little changed despite the dismal print, with NZD/USD largely consolidating throughout the day to close at 0.7085 Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

NZD/USD Daily Chart

Image of NZDUSD daily chart
  • Broader outlook for NZD/USD remains tilted to the downside as the Relative Strength Index (RSI) continues to track the bearish formation from earlier this year, with recent price action raising the risk for further losses as the pair snaps the recent series of higher highs & lows.
  • String of failed attempts to close above the 0.6950 (61.8% expansion) to 0.6960 (38.2% retracement) region may spur a move back towards the 0.6820 (23.6% retracement) to 0.6870 (78.6% expansion) area, with a break/close below the stated region opening up the 0.6780 (100% expansion) hurdle, which lines up with the November-low (0.6780).

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.