The New Zealand Dollar (NZD) declined on Wednesday, as data showed that the country’s economy grew less than expected in the final quarter of 2017. For the fourth quarter of 2017, New Zealand’s GDP grew 2.9% y/y versus 3.1% expected. The quarter-on-quarter outcome was 0.6% versus 0.8% estimated. While the economy has been expanding, inflation has remained subdued and the Reserve Bank of New Zealand (RBNZ) has cut interest rates to a record low. The GDP report has reinforced expectations that the RBNZ will be in no rush to raise interest rates.
In the 4-hourly timeframe, NZD/USD found strong resistance at 0.7353 and is now testing channel support. A break of the channel and major horizontal support at 0.7300 would see the pair move lower to the 50% retracement at 0.7275. Further support comes in at 0.7258 and then 0.7234. A move above yesterday’s high at 0.7353 is needed for the bull trend to resume towards resistance at 0.7385.
In the daily timeframe, AUD/NZD broke a head and shoulders pattern, with a measured downside target which coincides with the June lows at 1.038. The pair needs to move above the 1.080 level for a bullish reversal, with upside resistance at 1.085 near the neckline, followed by 1.0892. However, a break of 1.070 is needed for a bearish continuation, with supports at 1.065 and then 1.055.
