Can the Kiwi Rise Further?

The Kiwi has been on an impressive uptrend over the last week, rising from 0.6519 to 0.6785 against the USD. The first jump took place on November 1, most likely in response to improved economic conditions in the country.

As a result of the higher than expected trade deficit, which was driven by higher imports of goods and despite the increase in exports, New Zealand has boasted a much lower than expected unemployment rate, an unexpected improvement in the participation rate and a higher than expected employment change. All of the above, in conjunction with RBA’s decision not to increase interest rates “for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation” has further promoted the view of prosperity and pushed expectations to new highs. While RBA acknowledges that the economy is approximately at its maximum sustainable level, it appears that it is willing to allow for this situation to persist until inflation stabilises around 2%.

Technically, the NZDUSD has broken the 0.6653 support level (23.6% Fib) and has continued to move to the long-term level of 0.6794 (38.2% Fib), trading at 0.6784 at the moment. If the pair crosses that resistance level, then the next psychological barrier is expected to stand at about 0.6846. The continuation of this trend is naturally conditional of the developments in the US economy, such as the PPI and Michigan sentiment indices tomorrow.