Home Forex Market Analysis NZDUSD: Pair Loses Momentum Ahead of Business Confidence Report

NZDUSD: Pair Loses Momentum Ahead of Business Confidence Report

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NZDUSD: Pair Loses Momentum Ahead of Business Confidence Report
  • The business confidence index in New Zealand stood at 1.8 in May 2021 (MoM). 
  • Employment intentions in NZ have decreased from 20.5% in May 2021 to 19.6 in June 2021 (based on preliminary data). 
  • The medium price of US houses hit a record high at $350,000 in May 2021. 

The NZDUSD pair lost 0.43% on June 28, 2021, from the previous day. It traded from a low of 0.7033 to a high of 0.7087. The US dollar gained against the New Zealand dollar ahead of the NZ Consumer Confidence report to be released on June 29, 2021. 

Business outlook

Statistics by the Australia & New Zealand (ANZ) banking group show that business confidence in May 2021 (MoM) stood at 1.8. Preliminary data for June 2021 indicated that business confidence declined by two basis points to -0.4%. However, (own) activity outlook for the same month highlighted a 2 point increase to +29.1%.  

NZ Business confidence and own activity graphs

NZ Business confidence and own activity graphs

Investors are also expecting higher costs at 85.6% (+ 5 points) and inflation at -2.33%. The Reserve Bank of New Zealand (RBNZ) put the CPI target at a midpoint of 2%. Still, the constant rise in shipping costs, supply disruptions due to border restrictions, and commodity prices have led to uneven economic growth in Q2 2021.

Employment intentions have decreased from 20.5% in May 2021 to 19.6, with the ease of credit also reducing to -37.6 from -38.0. However, on annual analysis, June 2021 is expected to see a greater change in employment numbers at 17.8%  as compared to the previous month’s 12.4%.  

Consumer confidence in the US

The US consumer confidence report is scheduled for release on June 29, 2021, by the Conference Board (CB). May 2021 saw the index declined 0.2 points from 117.5 (in April 2021) to 117.2. With the situation index (based on the business/market outlook) at a high of 144.3, consensus estimates have put the confidence index at 119.0 (+1.54%). The index will have a positive impact on the dollar if it exceeds market expectations. 

Rising inflation numbers in the US may, however, drown consumer optimism as far as income and unemployment are concerned. Parents expect credit payments on child tax by the government will reach them by July 2021 to help in the short term. 

Eligible families to the advanced payment had up to June 28, 2021, to unenroll from the service under the American Rescue Plan (ARP). Under this plan, parents with children between 6 to 17 years would get an annual payment of $3,000, while those under six years would get $3,600 per child.

US house prices

The Federal Housing Finance Agency (FHFA) is expected to release the house price index for April 2021 (YoY) on June 29, 2021. It stood at 13.9%, with the previous month’s data at 1.4%. In warning about the housing bubble, Eric Rosengren, a US Fed official, warned that rising property prices would affect the economy’s stability.  

As a sign that the US inflation rate had far exceeded the 2% Fed target, medium prices of existing homes (according to national realtors) closed at a record high of $350,000. This sale was 23.6% higher in May 2021 (YoY). The boom was attributed to the Fed’s purchase of mortgage-backed securities worth $40 billion monthly. Additionally, the Treasury holds a monthly debt of $80 billion to help in the asset-buying initiative. 

Technical analysis

The NZDUSD pair formed a rounding top pattern from April 1, 2021, before the sharp decline was witnessed on June 2, 2021.

NZD/USD  chart

The price is moving below the 9-day EMA at 0.7048, suggesting that the price may continue the downtrend towards 0.6989. However, the low trading volume may indicate a price reversal as the rounding top takes a turn. Buying activity is still low with the 14-day RSI at 36.33. Increased buying momentum may push prices towards 0.7122.

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