NZD/USD Headed for 63 Cents But

NZD/USD Headed for 63 Cents But

NZD/USD Headed for 63 Cents But

The New Zealand dollar has also been on our radar all day. For the second time this year, dairy prices fell at the Global Dairy Auction. This week, prices declined -1.4%, compared to -1.6% at the Jan 5th auction. Its not a good start to the year for New Zealand dairy farmers who will likely see a lower payout from Fonterra. The Reserve Bank of New Zealand was reluctant to call a bottom in dairy after prices increased in the third quarter and their caution is now validated. If we don’t see a recovery in the coming month or two, the RBNZ may have to consider lowering interest rates again especially since consumer prices fell -0.5%, matching the decline in Q4 2008 which was the largest drop since the fourth quarter of 1998. In the meantime, the New Zealand dollar will remain under pressure on the back of these latest reports.

Technically the daily charts show a very clear double top in NZD/USD. However the latest decline has taken the currency pair to the 61.8% Fibonacci retracement of the 2009 to 2011 rally at 0.64 cents, which is key support. We believe that it will break paving the way for a move down to 63 cents and a test of the September lows. Should NZD/USD rally, resistance will be at 65 cents.

Chart Of The Day

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