NZD/USD TRADING GUIDE: TRADE BALANCE

 (March 26, 2014)

New Zealand is scheduled to release its trade balance for February in the upcoming Asian trading session. Analysts project the trade surplus to widen from January’s 306 million NZD surplus to 595 million NZD, reflecting better trade activity for the past month.

A quick look at NZD/USD’ reaction to mixed data back when the January figures were release still reflects underlying Kiwi strength. Back then, the actual figure came in stronger than the estimated 230 million NZD reading but the previous month’s surplus was revised down from 523 million NZD to 493 million NZD, showing that the initially reported trade activity was not as strong.

Despite that, NZD/USD managed to hold on to its gains during the February 26 release date and even go for more. The currency pair was kept on its uptrend mostly by interest rate hike expectations from the RBNZ (Reserve Bank of New Zealand).

NZD/USD is currently testing a short-term uptrend line visible on its 4-hour and 1-hour time frames, indicating that further rallies could be in the cards if the actual figure comes in better than expected. Bear in mind that NZD/USD is supported by a positive interest rate differential between the Fed and the RBNZ. However, weakening risk appetite is preventing the pair from staging significantly strong rallies for now.

On the other hand, a smaller than expected trade surplus or a deficit might lead to a downside break from the trend line. This might usher in a short-term selloff for the pair, as the RBNZ has been blaming Kiwi strength for the weakness in the country’s exports lately. If the trade balance reflects this slowdown, RBNZ officials might grab the opportunity to jawbone the Kiwi later on.

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