NZD/USD Weekly Fundamental Analysis April 23-27, 2012, Forecast

By FXEmpire.com

Introduction: The recent strength of the kiwi, a currency sometimes overlooked by traders, made its moves much more predictable. This applies to support and resistance lines alike. This is a very safe pair to trade, not a great deal of volatility but predictability.

Analysis and Recommendation:
The NZD/USD is trading at 0.8187 hoping to pick some momentum up this week. There is little eco support in New Zealand, but the kiwi should be able to rebound this week

The weight is on Asian equities today (though China is outperforming), with the region headed towards a flat to lower performance on the week. The global all-world aggregate (based on MSCI data) has fared a bit better, but could be flat as well depending on today’s Western market performance. The equity background has played against a generally better bid USD, in keeping with the typical correlation in a week where risk sentiment remained fairly repressed. Indeed, sentiment has been repressed enough to give both the USD and EUR a bid (on a trade-weighted basis) versus Asian non-Japan currencies. Yesterday we commented that despite the apparent near term re-acceleration in industrial production in Asia, global growth dynamics are still too repressed to suggest a driver for currency appreciation. Instead it is the Federal Reserve and monetary expansion that most favors support for the Asian FX space; in the near term on its own merits, Asia non-Japan will find difficulty in sustaining rallies. Indeed next week both the Federal Reserve and Bank of Japan will announce policy, and it is the latter that looks biased to continue to ease given Governor Shirakawa’s recent comments regarding “continuing powerful monetary easing”.

Yesterday’s Spanish bond auction did not bring any kind of horrible market punishing result, though auction yields were of course higher than back in January when the last 10-year sale occurred. Ultimately Spanish bonds fell post-auction, and the 10-year sold off to yield 5.925% vs. the 5.743% at the auction

As the weekends, worries over Euro Zone debt and economic growth in the US and China continue to grip commodities and were seen trading in a very tight range waiting for fresh cues for further directional moves. In a lackluster trading, spot gold held steady. Base metals in LME traded mostly flat as investors remained cautious after weak economic indicators from the U.S. Though, successful French and Spanish bond auction allayed concerns over Euro Zone’s deteriorating financial health to some extent. Unexpected rise in German business climate assessed by Ifo lifted the sentiments too. LME copper managed to hang above $8000 a ton. In tandem with the international market, movements in MCX base metal complex and bullions were dreary. Crude oil rose for the first time in three days supported by positive German data. Meanwhile, G-20 finance ministers and central bankers are to meet in Washington later today. The Indian rupee was seen bouncing off a 3-month low it hit during previous session at 52.11 up 0.17 percent

Market emotions remained rather subdued in the wake of persistent debt concerns in the Euro region in spite of a strong German business sentiment. Looking into the evening, no major economic data is slated for release. The ongoing G-20 finance minister’s meet in Washington would be the key event markets would be looking up to take cues from. With Chinese economy going through a lean patch, possible Chinese Central bank liquidity action in the coming days could be a marquee event and have a real impact on the commodities.

Overall, the week has witnessed Euro zone debt crisis scaling up with yields on Spanish and Italian bonds reaching unacceptable levels, which prompted Greece, Ireland and Portugal to ask for bailout.

Historical

Highest: 0.8816 USD on 31 Jul 2011.

Average: 0.7543 USD over this period.

Lowest: 0.6619 USD on 07 Jun 2010.

Economic Highlights of the coming week that affect the Yuan, Yen, Aussie and Kiwi

AUD	CPI (QoQ)	0.6%
AUD	Trimmed Mean CPI (QoQ)	0.6%	0.6%
USD	New Home Sales	320K	313K
USD	CB Consumer Confidence	70.3	70.8
USD	Durable Goods Orders (MoM)	-1.5%	2.4%
USD	Core Durable Goods Orders (MoM)	0.5%	1.8%
USD	Interest Rate Decision
NZD	Interest Rate Decision	2.50%	2.50%
JPY	Tokyo Core CPI (YoY)	-0.4%	-0.3%
JPY	Unemployment Rate	4.5%	4.5%
JPY	Retail Sales (YoY)	9.8%	3.5%
JPY	Interest Rate Decision	0.10%

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Originally posted here