Kiwi has been grounded
Fundamentals
Despite being one of the favorite "buy side" currencies for "carry-trade" investors, the New Zealand Dollar (Kiwi) continues its slump, as the ongoing global slowdown has traders in a risk adverse mode. Not helping the Kiwi's cause was the release of a government report showing consumer prices falling in the final quarter of 2008. With inflation fears waning, traders are speculating that the Reserve Bank of New Zealand (RBNZ) will cut rates by up to 100-basis points at their next meeting on January 29th. Just last week Standard and Poor's lowered its outlook for the country's foreign currency rating to negative from stable, citing its non-domestic debt levels and rising current-account deficit. Even though the benchmark rate stands at an attractive 5%, traders are hesitant in placing carry-trades with the New Zealand Dollar versus the extremely low yielding currencies like the Japanese Yen and U.S. Dollar due to concerns that the RBNZ will be forced to continue to lower rates as commodity prices continue to fall and the country's growth rate tumbles. However, once signs that the global recession may be starting to recede, traders will once again flock back to the Kiwi.
Technicals
Looking at the daily chart for the March N.Z. Dollar, we notice the abrupt end to the nearly 6-week rally last week. Notice the price really accelerated to the downside once the market closed below the 20-day moving average. The 14-day RSI has not yet reached oversold territory, with a current reading of 33.76. Support is seen at the contract lows of 0.5164, with resistance seen at 0.5560.
Mike Zarembski, Senior Commodity Analyst
