NZD/USD Daily Signals – December 19, 2017

New Zealand dollar falls sharply

New Zealand firms returned once again to their two-year inflation anticipations and also dropped their growth forecasts which will probably sum to the outlook of the central bank to renew the rates that will remain on hold until 2019.

The central bank is authorized to hold annual consumer price inflation between 1 per cent and 3 per cent. In the previous survey three months ago, the Reserve Bank’s survey of expectations indicated respondents view annual inflation at 1.87 per cent in one year versus 1.77 per cent rate. The survey releases just days before the Reserve Bank is scheduled to release its latest official cash rate implementation and monetary policy statement.

The central bank forecast rates would remain on hold until at least September 2019 in its August monetary policy statement. However, the New Zealand dollar has steadily dropped during the recent times and is now below at 7 per cent where the central bank forecast would be on a trade-weighted index basis.

There are also indications of inflationary pressure specifically as the new government is outlining to boost minimum wage and infrastructure spending.

While the central bank is planning to reschedule its forecasts on Thursday in order to mark the emerging inflationary pressure and a weaker currency, the economists anticipate an intensely cautious tone.

The annual hourly wage growth for one year ahead is viewed at 2.25 per cent versus 2.26 percent in the previous survey and extended from 2.49 per cent to 2.57 per cent in two years. The unemployment rate is viewed at 4.66 percent in one year down from a previous view of 4.78 per cent. The wage growth rate is also anticipated to remain moderate.

The NZD/USD pair shows more fluctuation near the 0.6934 level keeping the stability of the daily close below. The pair keeps the correctional bearish trend scenario valid until now. We keep waiting to resume the bearish wave that targets the 0.6883 followed by 0.6852 levels on the near term basis. It is important to note that the pair breaching at the 0.6883 level will complete conformation. This will push the price to test the most important support for the short term trading at the 0.6852 level direct before any new attempt to change directions. This reminds you that these levels represent the next trend keys with a bearish momentum and negative stability below the resistance area. The pair’s stochastic settles clearly within the 20.0 areas to support the attempts to gather the negative momentum. This confirms the pair’s attempt to reach the waited target. However, we shall look for confirmation with the 50EMA which has been rejected to hold the price action below the resistance level.


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