The NZD/USD posted substantial gains on Wednesday. NZD/USD is trading at 0.6841 in the European session, up 0.55% on the day.
Manufacturing Sales Surge In Q4
Manufacturing Sales were outstanding in the fourth quarter, with a gain of 12.0%. This marked an impressive rebound from the -2.3% reading in Q3. Construction sales also soared by 16%. The strong numbers resulted from the easing of Covid lockdowns in the fourth quarter, as pent-up demand led to an upsurge in economic activity. We’ll get a look at another barometer of the manufacturing sector on Thursday, with the release of the Business NZ Manufacturing Index. A strong reading would indicate that the manufacturing sector is gaining strength.
The New Zealand dollar continues to show volatility, and as a risk currency, it is vulnerable to haven flows to the US dollar. The war in Ukraine has raised risk aversion as the West continues to slap sanctions on Moscow. On Tuesday, US President Biden announced a total ban on Russian energy imports. Still, EU members are unlikely to join, as Europe is much more dependent on Russian energy supplies than the US. At the same time, the kiwi is also a commodity-based currency, and the surge in commodity prices has provided some support, as NZD/USD is up 1.0% in March.
The Federal Reserve will almost certainly raise rates next week, likely by 25 basis points. With the turbulent economic landscape due to the Ukraine crisis and the staggering rise in oil prices, Fed policymakers have to also worry about stagflation. The Fed will have to be cautious about raising rates and not choking off economic activity, which means we could see a slower timeline for raising rates than what the markets had anticipated only a few weeks ago.
NZD/USD - Technical View
- NZD/USD has support at 0.6802 and 0.6733
- There is resistance at 0.6931 and 0.7000
