NZDJPY: Another blow to NZD, but it's still standing

Yesterday we highlighted some technical and short-term fundamental weakness in the kiwi, but the stubborn commodity currency is holding its ground, even in the face of softer than expected trade numbers. The figures showed that a fall in dairy exports, NZ main export, was to blame for softer than expected trade numbers. In particular, falling demand from China is largely to blame for softening dairy exports.

Exports were 3.92bn in February, missing an expected 4.10bn, and imports were slightly above expectations at 3.87bn. The overall trade surplus was 50m in February, which is higher than a revised 33m surplus in the prior month but lower than an expected 350m surplus. Year-on-year exports fell 13%, with milk powder, butter and cheese exports falling 41% from February last year.

The news triggered some shorts in the kiwi but NZDUSD remains above key support levels. One month of soft economic isn’t game changing, thus it’s not entirely surprising that the market was largely able to brush aside these figures. However, if exports continue to suffer in coming months (January’s figures also weren’t crash hot) then the kiwi may begin to take notice.

One to watch: NZDJPY

NZDJPY is looking a little top heavy in the near-term, which isn’t surprising given that the pair has jumped around 200 pips since last Friday. Looking ahead it will be interesting to see if NZDJPY can break through an important resistance zone around 92.00 or if it slides below a near-term low around 91.15. Given some technical weakness in the pair at the moment our bias is lower below 92.00.

Source: www.forex.com