The Kiwi Dollar has been making a remarkable recovery over the past week, shaking off most of its Brexit losses. Although there was somewhat of a lag, the NZD/USD recovered largely as a result of strong Trade data and a weakening USD. However, excellent New Zealand results released on Thursday kept momentum going as the week progressed. Looking ahead, the early part of this week is relatively data rich for the Kiwi Dollar so the pair is worth watching.
Whilst the Kiwi Dollar gapped lower as the week opened, eventually, the pair staged a strong recovery on the back of the New Zealand Trade data. Specifically, the Trade Balance results came in well above expectations at 358M rather than the predicted 173M. In addition to this, we saw both NZ Exports and Merchandise Imports move up to 4.57B and 4.22B respectively. Finally, a substantial improvement in the ANZ Business Confidence figure to 20.2 kept buying pressure high later in the week. Combined with a weakening USD, the Kiwi Dollar recovered to much where it was prior to the Brexit vote by the week’s end.
Looking at the technical data now, The NZD/USD looks set to have yet another bullish week in store as it seeks to test the 0.73 handle. Notably, EMA activity is highly bullish on not only the daily chart but also the H4 and H1 charts. Furthermore, RSI is not quite overbought as of yet which will give the pair some room to move higher in the coming week. However, keep an eye on the daily Parabolic SAR which is signalling that the Kiwi Dollar could move lower after reaching the 0.7216 zone of resistance.
As we move on, the early part of this week is relatively rich in NZ data which could see some serious movement for the Kiwi Dollar. Namely, the Home Quotable Value and Global Dairy Trade Prices index results are due. Solid outcomes for these two indicators could see the NZD move to challenge the 0.73 handle once again. However, the US Non-Farm Employment Change, Trade Balance, and Unemployment Rate results are due later this week which could counteract any trends that form during the Monday and Tuesday sessions.
Ultimately, the Kiwi Dollar is weathering the aftermath of the Brexit Vote somewhat better than other currencies. As a result, the pair’s bullishness could extend into this week, especially if GDT Price index results come in with another increase. However, don’t discount the effect that the Australian election could have on the NZD. As Australia is New Zealand’s largest trading partner, AUD volatility can spill over into the Kiwi Dollar and could impede the pair’s ascent as a result.