NZD/USD Weekly Forecast Dec. 19-23, 2011, Fundamental Analysis

The NZD/USD pair retreated last week to reach its lowest level in three weeks, where the current risk aversion in the FX market led the higher-yielding currencies to fall against the safe haven dollar.

The New Zealand economy will release the Gross Domestic Product for the third quarter, and the economy is expected to have expanded by 0.6% from the prior 0.1% which could support the Kiwi against the dollar but the general movement will remain to the downside for the pair.

On the other hand, the U.S. economy will release the final GDP revision for the third quarter, where it’s expected steady at 2.0%, but any change will be faced by a violence move from the greenback.

Expectations remain for a weaker New Zealand dollar since the RBNZ announced their decision to keep the interest rate steady at its lowest level of 2.50%, in addition to the comfortable tone regarding the current inflation pressure.

The current sentiment supports the US dollar and pushed it to record its highest level in eleven months against the euro, as concerns increased regarding the EU debt crisis after the latest EU leaders’ summit failed to provide the market with confidence.

Major highlights for this week that will affect the NZD/USD pair’s trading:

Monday December 19:

On Monday at 21:00 GMT (Sunday), the New Zealand economy will issue the Westpac NZ Consumer Confidence for the fourth quarter, which had a previous reading of 112.

The Performance Services Index for November will be released at 21:30 GMT with a prior reading of 50.6.

At 00:00 GMT the New Zealand economy will release the NBNZ Activity Outlook for December which had a previous reading of 28.8. As for the NBNZ Business Confidence for December it had a prior reading of 18.3.

Tuesday December 20:

The U.S. economy will release the Housing Starts for November at 13:30 GMT, where it’s expected to show a rise of 0.3% to 630 thousand compare to the prior drop of 0.3%.

As for the U.S. Building Permits it’s expected to drop 1.4% to 635 thousand from 653 thousand.

Wednesday December 21:

On Wednesday at 21:45 GMT (Tuesday), New Zealand will issue the Current Account Balance for the third quarter, where the previous reading showed a deficit of NZ$0.921 billion.

The U.S. economy will release the Existing Home Sales for November at 15:00 GMT and it’s expected to advance 2.4% to 5.09 million from 4.97 million.

Thursday December 22:

On Thursday at 21:45 GMT (Wednesday), the New Zealand economy will release the Gross Domestic Product for the third quarter, where the economy is projected to have expanded by 0.6% after 0.1% and on the year by 2.2% after 1.5%.

The U.S. economy will release the final GDP reading for the third quarter at 13:30 GMT, the annualized Gross Domestic Product for the third quarter is expected to remain unrevised at 2.0%.

The Personal Consumption for the third quarter is also expected steady at 2.3% as well as the Core Personal Consumption Expenditure to hold at 2.0%.

The U.S. economy will also issue its weekly initial claims, where the number of people filing for first-time claims for the state unemployment insurance dropped to 366 thousand last week.

At 14:55 GMT, the United States will issue the University of Michigan Confidence for December, where the previous reading was 67.7 and it’s expected to rise to 68.2.

The U.S. leading index for November will be released at 15:00 GMT and expected to slow to 0.3% from 0.9%.

Friday December 23:

On Friday at 13:30 GMT, the U.S. economy will release the Durable Goods Orders for November with a previous reading of –0.7% and it’s expected to come at 2.1%.

The Personal Income for November is expected to slow to 0.3% from 0.4%, while the Personal Spending is expected to come at 0.4% from the previous 0.1%.

The core Personal Consumption Expenditure for November is expected in line with the previous rise of 0.1% on the month and 1.7% on the year.

At 15:00 GMT, the U.S. economy will issue the New Home Sales for November, where it’s expected to rise 1.8% to 313 thousand from 307 thousand.