- The New Zealand Dollar continues to rise thanks to positive market sentiment.
- NZD rises in line with global stocks, while oil price continues its bearish trend and US PMIs are mixed.
- NZD/USD ends the week higher, approaching the 200-day SMA at 0.6100.
The New Zealand Dollar (NZD) rises again on Friday, as positive sentiment in markets continues and a new government takes office in Wellington, ending weeks of coalition talks.
Market sentiment is buoyed by falling oil prices as OPEC+ countries argue over who should shoulder planned supply cuts. Meanwhile, in the US, according to inventory figures, oil inventories are rising, further putting downward pressure on prices. Good for cash-strapped motorists and businesses facing rising input costs. Global PMI data released during the week was generally positive, further lifting sentiment.
As a currency linked to commodity prices, the NZD is sensitive to changes in the perception of global growth and generally reflects investor sentiment.
Daily Market Summary: Good mood boosts NZD
- The New Zealand Dollar rises, benefiting from positive risk appetite amid falling oil prices and upbeat macroeconomic data.
- Bad news regarding Chinese asset manager Zhongzhi, another casualty of the Chinese property bubble, was not enough to raise significant concerns about the stability of the Chinese economy. Although the company announced that it was insolvent, with total liabilities of between $58 billion and $64 billion, according to a Reuters report, government intervention is likely to prevent contagion.
- “Financial regulators will almost certainly intervene aggressively if there are any signs that Zhongzhi’s problems are spreading,” Christopher Beddor, deputy director of China research at Gavekal Dragonomics, was quoted as saying by Reuters.
- Preliminary Purchasing Managers’ Index (PMI) data for November in the Eurozone and the United Kingdom showed better than expected results. In the United States, PMIs were mixed: the services index far exceeded estimates, coming in at 50.8 versus 50.4 expected, but manufacturing lagged, reading 49.4 versus 49.8 expected.
- The center-right New Zealand National Party eventually formed a government with its coalition partners, the populist New Zealand First party and the libertarian ACT New Zealand party, ending nearly six years of Labor’s reign.
New Zealand Dollar Technical Analysis: NZD/USD Breaks But Fails to Hold Above Key Resistance
The NZD/USD pair – the number of US Dollars that one New Zealand Dollar can buy – rose again on Friday to settle near the 200-day SMA.
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New Zealand Dollar vs. US Dollar: Daily Chart
The pair is in a short and medium-term uptrend, which remains biased to the bulls.
The 200-day simple moving average at 0.6100 (just above the current market level at 0.6084) is likely to provide an important resistance level for further upside, so price will likely stop there at first contact.
The MACD momentum indicator is rising in line with prices, suggesting that the uptrend is healthy.
A bullish inverse head-shoulder pattern may have formed at the lows. The pattern is identified by the labels applied to the chart above. L and R represent the left and right shoulders, while H represents the head. The pattern target is at 0.6215. This adds more weight to the bullish argument.
However, the long-term trend remains bearish, suggesting that the risk of a recapitulation remains.
New Zealand Dollar FAQ
What factors determine the price of the New Zealand Dollar?
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known currency among investors. Its value is largely determined by the health of the New Zealand economy and the policy of the country’s central bank. However, there are some peculiarities that can also cause the NZD to move. The evolution of the Chinese economy tends to move the Kiwi because China is New Zealand’s largest trading partner. The bad news for the Chinese economy will likely translate into fewer New Zealand exports to the country, which will affect the economy and therefore its currency. Another factor moving the NZD is dairy product prices, as the dairy industry is New Zealand’s main export. High dairy prices boost export earnings, contributing positively to the economy and therefore the NZD.
How do RBNZ decisions affect the New Zealand Dollar?
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate of between 1% and 3% over the medium term, with the aim of keeping it close to the midpoint of 2%. To do this, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ raises interest rates to cool the economy, but the move will also drive up bond yields, making investors more attractive to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The so-called rate differential, or what rates in New Zealand are or are expected to be compared to those set by the US Federal Reserve, can also play a key role in the movement of the NZD/USD pair.
How does economic data influence the value of the New Zealand Dollar?
The release of macroeconomic data in New Zealand is key to assessing the state of the economy and can influence the valuation of the New Zealand Dollar (NZD). A strong economy, based on high economic growth, low unemployment and high confidence is good for the NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to raise interest rates if this economic strength is accompanied by high inflation. Conversely, if economic data is weak, the NZD is likely to depreciate.
How does overall risk sentiment affect the New Zealand Dollar?
The New Zealand Dollar (NZD) tends to strengthen during periods of risk appetite, or when investors perceive overall market risks to be low and are optimistic about growth. This usually translates into a more favorable outlook for commodities and so-called “commodity currencies” such as the kiwi. Conversely, the NZD tends to weaken during times of market turmoil or economic uncertainty, as investors tend to sell riskier assets and flee to more stable havens.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
