NZD/USD: Trading the New Zealand Trade Mar 2014

New Zealand Trade Balance, published each month, is a key release.  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 Wednesday at 21:45 GMT.

Indicator Background

New Zealand Trade Balance is closely linked to currency demand, as foreigners must purchase New Zealand dollars in order to pay for the country’s exports. An unexpected reading could affect the direction of NZD/USD.

Trade Balance dropped to $306 million in January, but this easily surpassed the estimate of $230 million. The markets are expecting a surge in February, with the estimate standing at $600 million. Will the indicator again surprise the markets and beat the estimate?

Sentiments and levels

The fact that the New Zealand dollar impressed to end another week higher despite taking a hit after Janet Yellen’s rate comments across the board is telling: the tightening cycle in New Zealand has already begun. Even if the US is getting closer to its own real tightening (and not only slower loosening), the advantage that New Zealand has in this round can certainly be reflected for another week. So, the overall sentiment is bullish on NZD/USD towards this release.

Technical levels, from top to bottom: 86.76, 86.40, 85.86, 85, 84.35, and 83.92.

5 Scenarios

1. Within expectations: $540M to $660M. In such a scenario, NZD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: $661M to $740M: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above $740M: A surge in the reading could bolster the kiwi, and the pair could break a second line of resistance as a result.
4. Below expectations: $460M to $539M: A weak reading could push NZD/USD below one support level.
5. Well below expectations: Below $460M. In this scenario, the pair could push below a second level of support.

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

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