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FX: New Zealand Dollar’s Fall is Helping the Country Economy

New Zealand economy has been suffering because it had a strong currency that didn’t help the exporters. The countries interest rate of 2.5% remained unchanged from March 2011 which made the NZD along with AUD a safe heaven, but also a good opportunity for those who are doing carry trade.

While Reserve Bank of Australia decided to cut the countries interest rate from 3% to an historical low of 2.75%, to drag the countries dollar lower, Reserve Bank of New Zealand announced several days ago that they have intervened directly into the FX market by selling NZDs. This way they were hoping to weaken their currency.


Chart: NZD/USD, Daily

By luck, the good labor market data that came from the United States, has strengthen the US dollar and drove both AUDUSD under the parity level and the NZD 400 pips lower. Looking at the technical perspective we can see that today the price broke an up channel trend line. This might signal further falls for this pair, but we still need a daily close to increase this probability.

The price might find a good support area at 0.8160, which was tested in December 2012 and March 2013. The 28 RSI is getting near an oversold area so this might be another signal that we should wait and see what will happen near support before entering a medium term short.

If the NZD will continue to weaken than we might see better economic data coming from New Zealand and a stabilization of the price under 0.8000.

FX: New Zealand Dollar’s Fall is Helping the Country Economy by