NZD/USD Weekly Fundamental Analysis, August 10 – August 14, 2015 Forecast

Weekly Analysis and Recommendations: The NZD/USD shook off a bearish dairy price forecast and increased speculation that the Fed will increase rates in September to post a potentially bullish technical closing price reversal bottom on the weekly chart. 

Early Friday, Fonterra cut its dairy price forecasts to the lowest since 2002. Instead of breaking on the news, the market rallied since the forecast was better than what traders were expecting. Also helping to boost prices was a surprise announcement of a 50-cent per kilogram support package for suppliers. The program is expected to spur the economy and cushion farm incomes, but it comes at the expense of investment. 

According to economists, the dairy industry would be hard hit by the new program. However, they did feel that the beneficial effects of low interest rates and the impact of a weak New Zealand dollar could soften the blow. 

Oversold technical factors helped aggressive counter-trend traders overcome negative risk sentiment and the price cut from Fonterra while giving short-sellers an excuse to book profits after a prolonged move down in terms of price and time. The momentum created by the reversal could trigger a 2 to 3 week short-covering rally, but the euphoria created by the move will not be able to overcome an eventual rate hike by the Fed and the effects the Fonterra dairy price cut will eventually have on the economy. 

If you’re an aggressive, counter-trend trader then look to take advantage of a potential 2 to 3 week rally. If you follow the longer-term fundamentals then watch for an opportunity to refresh your short positions at more favorable price levels. Eventually the long-term fundamentals will triumph over the short-term counter-trend momentum. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports. 

Major Economic Events for the Week: 

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