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Forex - NZD/USD weekly outlook: May 12 - 16

Published May 11, 2014 10:00AM ET
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NZD/USD ends the week with a loss of 0.6% after RBNZ comments - The New Zealand dollar fell to a one-week low against its U.S. counterpart on Friday, following comments from Reserve Bank of New Zealand Deputy Governor Grant Spencer.

NZD/USD hit 0.8603 on Friday, the pair’s lowest since May 2, before subsequently consolidating at 0.8612 by close of trade, down 0.4% for the day and 0.6% lower for the week.

The pair is likely to find support at 0.8591, the low from May 2 and resistance at 0.8670, the high from May 8.

RBNZ Deputy Governor Spencer said Friday that the high exchange rate is a cause for concern. He added that housing market prices and the exchange rate are important variables for the pace and timing of interest rate hikes.

"A big uncertainty is the future path of the exchange rate, which has a major bearing on traded goods prices and overall economic activity," he said. "The more downward pressure that the exchange rate exerts on prices and activity, the less pressure will need to be exerted by interest rates."

The RBNZ has raised the official cash rate by 25 basis points twice since March to 3.00% now.

On Wednesday, RBNZ Governor Graeme Wheeler warned against the Kiwi's current strength, saying that "it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars", in the face of worsening fundamentals.

In addition, official data showed that the number of employed people in New Zealand rose by 0.9% in the first quarter, beating expectations for a 0.6% increase, after a 1.1% gain in the three months to December.

The report also showed that New Zealand's unemployment rate remained unchanged at 6.0% in the last quarter, disappointing expectations for a downtick to 5.9%.

Meanwhile, the greenback remained under pressure after Federal Reserve Chair Janet Yellen said Wednesday that a high degree of monetary accommodation remains warranted given the slack in the economy.

Data from the Commodities Futures Trading Commission released Friday showed that speculators increased their bullish bets on the New Zealand dollar in the week ending May 6.

Net longs totaled 20,693 contracts as of last week, compared to net longs of 18,480 contracts in the previous week.

In the week ahead, investors will be looking to U.S. data on retail sales, consumer prices and consumer sentiment for further indications on the strength of the economy and the need for stimulus.

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

Monday, May 12

The U.S. is to publish data on the federal budget balance.

Tuesday, May 13

China is to release data on industrial production and fixed asset investment. The Asian nation is New Zealand’s second largest trade partner.

The U.S. is to produce data on retail sales, as well as reports on import prices and business inventories.

Wednesday, May 14

The RBNZ is to publish its bi-annual financial stability report. Governor Graeme Wheeler is to hold a press conference to discuss the report. Meanwhile New Zealand is to release data on retail sales.

Later Wednesday, the U.S. is to release data on producer price inflation.

Thursday, May 15

New Zealand is to release its annual budget statement, as well as private sector data on manufacturing activity.

The U.S. is to release data on initial jobless claims, consumer inflation and industrial production, as well as a report on manufacturing activity in the Philadelphia region.

Friday, May 16

The U.S. is to round up the week with reports on building permits and housing starts, and a preliminary reading on consumer sentiment from the University of Michigan.

Forex - NZD/USD weekly outlook: May 12 - 16

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