The New Zealand dollar will remain in focus after trading on Wall Street ends this evening, as Statistics New Zealand releases the latest growth estimate. The nation’s GDP is expected to have expanded by 0.8% in the fourth quarter of 2017 compared to 0.6% in Q3. If the data beats expectations then the kiwi, which has been outperforming her peers, could further extend its gains. However, analysts might be a bit optimistic in their forecasts and the greater risk in my view is that it may actually disappoint. If it does then the kiwi could drop hard, especially against the likes of the euro and pound, which have come back to life in recent days.
Ahead of the data release, the EUR/NZD was clinging onto key support around 1.6820-60 area. Here, prior lows met a bullish trend line and the 50-day moving average. In the event the EUR/NZD breaks below this zone then the next potential support could be all the way down at 1.6610, which corresponds with the long-term bullish trend line. Below here, the 200-day moving average and prior support converge around 1.6520. On the upside, the next key resistance is around 1.7000, followed by a more significant area between 1.7090-1.7125. If and when the EUR/NZD climbs above this resistance zone then the bulls may aim for the liquidity pool that would be resting above the 2017 high of 1.7475 next. Given that the long-term trend is bullish, our base case is that the uptrend would hold for a while yet.
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