NZD/USD Weekly Fundamental Analysis – January 4-8, 2016 -Forecast

Weekly Analysis and Recommendation:

The NZD/USD closed the last trading session of the week at 0.6831 rebounding a bit this week as traders moved back to the commodity link currencies ahead of the new year. The New Zealand dollar declined as weaker oil prices weighed on commodity currencies and local importers sold the kiwi to pay for Christmas goods in a period of low foreign exchange liquidity.

The year’s selloff in the kiwi came as prices of dairy products fell to their lowest levels in six years in August, on the GlobalDairyTrade platform and on concern demand from China was waning in the face on increased supply, especially from Europe. Prices revived somewhat in the second half of the year. The kiwi has also strengthened somewhat heading into the end of the year, even though the Reserve Bank cut its benchmark interest rate to 2.5 percent, while the Federal Reserve raised rates for the first time in almost a decade.

Oil prices fell 3 percent after a report by the US Energy Information Administration showed American inventories rose 2.63 million barrels last week amid warmer than usual northern hemisphere weather, which added to concerns about an oil supply glut. That weighed on commodity linked currencies such as the kiwi, which is weaker as local importers sell the currency to pay for stock brought in for the Christmas period.

“A lot of importers are making payments and paying bills to clear them off the books for the end of the month or the end of the year and therefore there will be natural selling pressure on the New Zealand dollar,” said Derek Rankin, director at Rankin Treasury Advisory in Auckland.

While most currency market turnover is normally speculative, in quieter times such as the Christmas and New Year holiday period, currencies are more likely to be impacted by trade flows such as importer selling, Rankin said.

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 and we provide daily updates and outlooks.

Major Economic Events for the week:

 

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