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Forex - NZD/USD weekly outlook: January 27 - 31

Published 01/26/2014, 08:57 AM
Updated 01/26/2014, 08:57 AM
NZD/USD ends the week down 0.53%; RBNZ, Fed in focus - The New Zealand dollar fell sharply against its U.S. counterpart on Friday, after a steep selloff in U.S. equities and ongoing turmoil in emerging markets dampened demand for risk-sensitive assets.

NZD/USD fell to 0.8212 on Friday, the pair’s lowest since January 20, before subsequently consolidating at 0.8214 by close of trade, down 1.06% for the day and 0.53% lower for the week.

The pair is likely to find near-term support at 0.8211, the low from January 20 and resistance at 0.8295, Friday’s high.

A broad based selloff in financial markets Friday spurred safe haven demand. U.S. stocks suffered their worst weekly loss since 2011, with the Dow plunging 318 points on Friday.

Market sentiment was hit by concerns over a slowdown in China after data on Thursday showed that the preliminary reading of the HSBC manufacturing index fell to a six-month low in January.

The Asian nation is the world’s second largest economy and New Zealand’s second biggest export partner.

Meanwhile, a selloff in emerging markets accelerated on Friday, after the Turkish lira fell to the latest in a series of record lows against the dollar. South Africa’s rand, the Russian ruble and the Argentine peso all fell to multi-year lows against the greenback.

Emerging market currencies have been hard hit since the Federal Reserve announced plans last month to begin scaling back its asset purchase program.

The New Zealand dollar was also sharply lower against the yen on Friday, with NZD/JPY plunging 1.98% to hit a seven-week low of 83.95 at the close.

Data from the Commodities Futures Trading Commission released Friday showed that speculators reduced their bullish bets on the New Zealand dollar in the week ending January 21.

Net longs totaled 8,556 contracts as of last week, down 11% from net longs of 9,614 contracts in the previous week.

In the week ahead, Wednesday’s outcome of the Federal Reserve’s monthly meeting will be in focus amid expectations for a reduction to USD65 billion from the current USD75 billion in the bank’s stimulus program.

Data from the U.S. on fourth quarter growth and an interest rate decision from the Reserve Bank of New Zealand will also be closely watched.

Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.

Monday, January 27

The U.S. is to produce data on new home sales, a leading indicator of demand in the housing sector.

Tuesday, January 28

The U.S. is to release data on durable goods orders, a leading indicator of production, as well as what will be a closely watch report on consumer confidence.

Wednesday, January 29

The Federal Reserve is to announce its federal funds rate and publish its rate statement.

The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

New Zealand is also to publish data on building consents.

Thursday, January 30

The U.S. is to publish preliminary data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and data on pending home sales.

Later Thursday, New Zealand is to produce data on the trade balance.

Friday, January 31

The U.S. is to round up the week with a report on manufacturing activity in the Chicago region, revised data on consumer sentiment and a report on personal spending.

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