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Kiwi’s Four-Day Advance to Face Headwinds Ahead of 0.80-Figure

Kiwi’s Four-Day Advance to Face Headwinds Ahead of 0.80-Figure

2011-05-20 22:16:00
Michael Boutros, Technical Strategist
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The New Zealand Dollar NZ$

NZD/USD NY Spot Close 0.79704

Kiwis_Four-Day_Advance_to_Face_Headwinds_Ahead_of_0.80-Figure_body_nzdusd_risk.png, Kiwi’s Four-Day Advance to Face Headwinds Ahead of 0.80-Figure

Kiwi’s Four-Day Advance to Face Headwinds Ahead of 0.80-Figure

Fundamental Forecast for New Zealand Dollar: Bearish

Confidence Data Boosts Kiwi – Cautious BoE Slaps Sterling

Dollar Gains are Tempered in Early US Trade- Haven Flows Ease

The kiwi advanced more than 1.4% against the dollar this week, paring the steep losses seen last week on the back a large bout of risk aversion. Remarks made by Reserve Bank of New Zealand Governor Allan Bolland weighed on the kiwi after he stated that the strength in the kiwi was ‘unwelcomed’ and that the cost of the Christchurch earthquakes could be as much as 8% of GDP. This week, as risk appetite slowly crept back into markets, the kiwi went back on the offensive as traders sought exposure to higher yielding assets.

The NZD/USD pair broke through trendline support at the 79-handle in pre-market trade on Friday, buoyed by government projection calling for the domestic economy to reach an operating surplus of NZ$1.3 billion by June 2015. Finance Minister Bill English cited the government would save some NZ$5 billion over four years to help fund improvements in the public sector and rebuild in the aftermath of the Christchurch earthquakes. Recovery in commodity prices also helped support the kiwi which continued to advance into the close of trade on Friday.

Daily relative strength suggests further upside potential for the kiwi, noting strong resistance at the long standing 0.80-figure. Subsequent ceilings are eyed at the 161% Fibonacci extension taken from the May 5th and 16th lows at 0.8030 and 0.8080. Expect to see consolidation in the pair early next week with Interim support seen lower at 0.7960, backed by floors at the 100% extension at 0.7930 and the 0.79-figure. The New Zealand economic docket is light next week with the only data of note released on Monday with the Reserve Bank’s Q2 inflation expectation report. That aside, the kiwi will be vulnerable to swings in sentiment as risk appetite continues to seesaw. -MB

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