NZD/USD: rally sold into after Q4 GDP miss

Currently, NZD/USD is trading at 0.7010, down -0.49% on the day, having posted a daily high at 0.7048 and low at 0.7002.

Forex today: dollar tumbles on FOMC less hawkish than expected

NZD/USD has dropped on the back of New Zealand's gross domestic product Q4 2016. the data arrived as 0.4% q/q and well below the expected +0.7% q/q. The previous was revised down as well to +0.8% from +1.1%. For the year, the data arrived as 2.7% vrs the expected 3.2%, down from prior 3.3% that was also revised down from 3.5%. New Zealand's economy has been propping the bird up, but a continuation of downgrades to the economy could start to weigh on the bird in time to come. However, the Q4 GDP was expected to moderate due to the drop in dairy and meat processing in that quarter, and partly as payback for a surprisingly high Q3, as explained by analysts at Westpac. 

Meanwhile, the market has now digested a less hawkish Fed and the dollar is on the backfoot and could remain so for days to come. The Atlanta Fed just downgraded their r expectations for Q1 GDP to below 1%. The US debt crisis could also come to the fore in due course should Congress look like they may not be able to agree on a quick solution past the summer months when the government will run out of funds. The jobs market, productivity and wages will be closely monitored in respect to the US recovery and expectations for further hawkishness from the Fed. 

NZD/USD 1-3 month:  

Analysts at Westpac explained that the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.6900 or lower. "Additional, and more recent, negative factors have been weaker dairy prices plus the RBNZ’s emphatic reminders it is on hold for a long time."

NZD/USD levels

NZD/USD reached as high the 6th March high at 0.7048 ahead of the 1st March low of 0.7098. There is a double bottom of potential resistance at 0.7130 on the 4hr chart in mid-Feb and late Fed business. For a stronger level of resistance on follow through, we have 0.7245 as the late Jan/early Feb support and double top resistance Feb 16th and 23rd. To the downside, 0.6950/60 is a key support area guarding 0.6880 and March lows.

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