Global macro overview for 24/08/2017:
Very good data from the New Zealand economy were published overnight. The New Zeland Trade Surplus narrowed to 85M in July, from a revised 246M surplus the month before, although the decline was much less than expected than -240M deficit. This was the fifth month in a row when New Zealand reported a trade surplus. Moreover, it was a first July surplus since 2012.
A country's trade balance reflects the difference between exports and imports of goods and services. The trade balance is one of the biggest components of the Balance of Payment, giving valuable insight into pressures on country's currency. The annual trade deficit remained at 3.21 billion in July, down from 3.65 billion in the previous month. Annual exports were worth 4.63 billion for the month and imports fell to 4.63 billion. The milk powder, butter, and cheese group led the rise in exports and the biggest buyer was China, which is expanding at a very fast pace, so the Chinese economy needs a reliable source of this goods. The second largest buyer was United Arab Emirates (UAE), the Philipines and the European Union.
Such a good data from the New Zealand economy might help to appreciate the New Zealand Dollar across the board in the near-term, but the global investors will wait for the confirmation from other indicators like GDP or inflation. Earlier this month, the Reserve Bank of New Zealand left the Official Cash Rate (OCR) unchanged at the level of 1.75%. In the official statement, the RBNZ said, that monetary policy is expected to remain accommodative for a long time, in order to support growth and guide inflation towards the RBNZ's target on a sustained basis. Numerous uncertainties remain and policy may need to adjust accordingly as the lower NZD is needed. The overall tone of the statement signals clearly that it is going to take a lot of accumulated evidence to warrant a departure from this cautious stance in either direction.
Let's now take a look at the NZD/USD technical picture at the daily time frame. There is head and shoulders price pattern evident on the chart with a neckline just around 0.7200 level. If this pattern is valid, then the projected target for the price is seen at the level of 0.7000. Nevertheless, the oversold market conditions do not support the bearish outlook just yet.
