Tradervox.com (Dublin) – Following weak US data, the kiwi rose and broke the 0.80 resistance line; however, the pair did not breach the line at 0.8075. The rise was supported by positive reports from New Zealand, where the country’s CPI rose by 0.3 percent in the Q2. There are two major events this week that will be of interest to investors.
First, the Trade Balance report which will be released on Tuesday at 2245hrs GMT is expected to show a contraction to $20 million. This is a big contraction compared to May reading of $301 million and it will be negative for the New Zealand dollar. The other major event is the Reserve Bank of New Zealand Rate Decision which will be announced on Wednesday at 2100hrs GMT. The official rate is expected to remain unchanged at 2.50 percent.
Looking at these two events, the market predicts the kiwi/dollar pair to be bearish this week. This is mostly attributed to the troubles in Europe which are expected to outweigh the strength of the New Zealand economy. The euro zone crisis has affected high yielding currencies in the market.
The technical lines this week will be the resistance line at 0.84 which was last breached in February this year followed by the 0.8329 which was reached in April before the pair dropped sharply. Another strong resistance that has held strong is the 0.8260, the pair reached this high in March as it progressed upwards. 0.815 has been a strong resistance in the past but it is showing some weaknesses as concerns over US economy continue to increase.
Levels that are within the range include the line at 0.8075 which capped this pair in July 2012, and is the highest in three months. The line at 0.8000 has changed roles from resistance to support, but it is a weak support line. The line has strong psychological importance but looks shaky as we go into the week. 0.79 has been a strong resistance line but has been broken. Other support lines include the one at 0.7840 and 0.7723.