This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
NZD punched through 0.8700 yesterday and remains fairly resilient in Asia today. A strong GDP report set the scene for the NZD yesterday, coming in well ahead of expectations and reinforced the strong momentum in the economy.
While the data was impressive, domestic consumption seems to be smoothing and perhaps this could be a trigger for the RBNZ to take a breather. On the USD side of the equation, a dovish Fed also helped weaken the greenback and fanned the pair higher.
As the pair edges ever closer to May highs, it’s really difficult to find a good value trade out of the current setup. In May the pair printed a high of 0.8780 before starting a major pullback. I would prefer to trade the pair on a momentum play on a close above May highs. A previous uptrend support line also comes in near the May highs and is also likely to present a challenge.
From there, August 2011 highs at 0.8843 could be a reasonable target provided NZ economic data continues to show some strong signs. The only noteworthy release out of New Zealand next week is trade balance and therefore the USD side of the equation is more likely to dictate how the pair trades.