New Zealand Dollar Slips on Disappointing PPI Report

Talking Points:

• NZ Reports PPI Output at -0.5% for 2Q Q/Q, Prior Quarter 0.9%
• NZ Dollar Slips After Most Disappointing Report Since 3Q 2012
• NZDUSD Tracks NZ 10-Year Yield Lower on Fading Rate Hike Bets

The New Zealand Dollar fell after Statistics New Zealand released the island nation’s Producer Price Index report for the second quarter of 2014. The PPI Output figure came in at -0.5 percent, the lowest print since the third quarter of 2012. In the prior quarter, the same figure was reported at 0.9 percent. The PPI Input figure came in at -1.0 percent, also lower than last quarter’s 1.0 percent and the lowest reported since the fourth quarter of 2012.

The New Zealand Dollar slipped likely because the disappointing figures further delayed interest rate hike expectations from the Reserve Bank of New Zealand, after the central bank had already signaled a pause earlier this year. The benchmark New Zealand 10-year government bond yield fell alongside the Kiwi after the data was announced. Currency Strategist Ilya Spivak had mentioned in his weekly forecast for the New Zealand Dollar that the currency might track lower if the country’s PPI figures were poor.

For traders out there who enjoy trading using technicals, Spivak sees near-term support at 0.8401 (June 4 low) and resistance at 0.8509 (23.6% Fibonacci retracement) for the NZDUSD. However, he feels the current setup is not attractive enough to justify entering a position, and recommends waiting for more direction from the currency pair. According to DailyFX’s Speculative Sentiment Tool, 77 percent of FXCM NZD/USD retail traders are long on the pair.

NZDUSD [15 mins – 08/18/2014] Chart created using FXCM Marketscope