NZD/USD Weekly Fundamental Analysis, November 16 – November 20, 2015 Forecast

Weekly Analysis and Recommendations:  The New Zealand Dollar traded mostly sideways-to-higher last week. The move basically mirrored the price action in the U.S. Dollar which failed to follow-through to the upside, following the bullish reaction to the stronger-than-expected U.S. Non-Farm Payrolls report on November 6. Technically oversold conditions may have contributed to the muted trade by the NZD/USD. 

For the week, the NZD/USD was up .0014, or 0.21% to finish at .6536. 

Early last week, the NZD/USD rallied after the Reserve Bank of New Zealand’s financial stability report led the markets to believe a rate cut is less imminent. The central bank said “there is less scope for monetary policy easing to offset a sharp rise in funding spreads.” In general, the report noted that financial stability risks had risen. The report highlighted the health of the housing and dairy sector in particular. The RBNZ fears a significant correction in these assets could undermine the economy’s financial stability due to bank’s large exposure. 

The RBNZ also said that New Zealand’s top exported good, dairy, has been hurt by the decrease in Chinese demand and the fall in commodity prices. The country’s central bank is concerned that indebted dairy farms may be negatively affected in the commodity’s price continues to fall. 

Also helping to underpin the market were comments from RBNZ Governor Wheeler who reinforced the view that an interest rate cut is on hold for the time being. 

One key event to watch this week is the milk auction. It will either reverse the trend or confirm the dropping demand for premium milk products. The dairy industry accounts for roughly 25% of GDP for New Zealand so this indicator is worth watching if you plan on trading the New Zealand Dollar. A less-than-stellar auction could encourage fresh selling pressure on the NZD/USD and open the door a little for a potential rate cut down the road. 

The key reports out of New Zealand include retail sales and inflation expectations. Retail Sales are expected to show a 1.0% increase while traders are looking for the inflation expectations report to show a reading of 1.94%. 

Weaker-than-expected reports could drag down the NZD/USD along with continuing weakness in other commodities such as gold, silver, copper, iron ore and milk. The U.S. consumer inflation report could also move the market especially if it comes out higher-than-expected.

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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