Traders are driving up the NZD USD on speculation of new demand from China for New Zealand exports but weakness in the New Zealand economy may limit gains to the upside.
Traders are driving up the NZD USD on speculation of new demand from China for New Zealand exports. Although China’s manufacturing sector posted a gain for the first time in nine months, it is going to take a lot more than a bullish economic report from another country to get the New Zealand economy rolling.
Just last week the Reserve Bank of New Zealand hinted at more rate cuts and an economic decline until mid-2010. This doesn’t sound like bullish news to me. News that the first quarter GDP contracted and that the budget deficit is widening could put renewed pressure on this currency pair later this week.
The NZD USD may go up on greater demand for higher-yielding assets but the reality is this economy is not strong enough to justify a rally. The daily swing chart is still down and is not expected to turn up until .5932 is violated. The bigger picture indicates that this market needs to correct to at least .5435 to .5307 before starting another leg up.