NZD/USD: Trading the New Zealand Trade Nov 2013

New Zealand Trade Balance, released monthly, is a key release. The indicator measures the difference in the total value between imports and  exports. A reading which is better than the market forecast is bullish for the New Zealand dollar.

Here are all the details, and 5 possible outcomes for NZD/USD.

Published on Tuesday at 21:45 GMT.

Indicator Background

Trade Balance is closely connected to currency demand, as foreigners must purchase New Zealand dollars in order to buy New Zealand goods and services. Traders should pay close attention to the GDP release, as any unexpected reading could affect the direction of NZD/USD.

Trade Balance has posted three straight deficits, but the September reading of -$199 million was much better than the estimate of -$730 million. The markets are expecting the deficit to balloon to -$345 million in October.

Sentiments and levels

The New Zealand dollar followed the Aussie last week and lost ground, but the fundamentals are looking positive, so we should see the kiwi reverse directions. Rising prices, prospects of a rate hike with an already non-zero interest rate, inflows of cash and positive net migration all support the currency. Without any projected tapering hints this week over in the US, the New Zealand dollar could recover. So, the overall sentiment is bullish on NZD/USD towards this release.

Technical levels, from top to bottom: 0.8360, 0.8270, 0.8225, 0.81.60, 0.8100, and 0.8050.

5 Scenarios

1. Within expectations:-360M to -330M. In such a scenario, NZD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: -329M to  -280M: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above -280M: A much better release than anticipated would likely bolster the kiwi, and the pair could break a second line of resistance as a result.
4. Below expectations: -410M to -361M. A weak figure could push NZD/USD below one support level.
5. Well below expectations: Below -410M. A very weak reading would likely hurt the kiwi, and the pair could push below a second level of support.

For more on the kiwi, see the NZD/USD.

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