NZD/USD subjugates dollar bulls at 0.7220; Sovereign foreign currency rating at 'AA'

Currently, NZD/USD is trading at 72.15, up +0.71% on the day, having posted a daily high at 0.7227 and low at 0.7158.

Uncertainty is not exclusive or limited to the US trade partners like China, Mexico or Canada. Also, the wild personality and 'to be determined' agenda courtesy of Donald J. Trump poses a challenge for the New Zealand economy as trade has been slowing. However, according to S&P's analysts, they key to ongoing growth has been a strong real estate market, net migration that supports growth and solid consumption. 

Historical data, however, indicates that the kiwi highest performance clocked at +1.60% (Jan.17) and its lowest at -1.26% (Jan.18).

Kiwi and Trump or 'Trump and the rest of the world'

Russell Blackstock, senior reporter at NZherald, notes that KiwiSaver balances may take a bashing and mortgage rates could rise. If the new President pursues tax cuts and an expansive fiscal policy as expected, these would have significant implications beyond US shores, according to investment expert Stephen Bennie from Castle Point Funds.

He further reports, "He believes Trump's loose-canon personality is also making world money markets jittery. Bennie points to Trump's first press conference as President-elect earlier this month, which Bennie describes as "disastrous"."

Yield Advantage; against the wall

Rebecca Howard, writer at Scoop Independent News, notes that ANZ Bank New Zealand senior economist Phil Borkin said Saturday's inauguration did little to shed light on the Trump's administration's plans. Markets had rallied strongly after Trump's election in November with the greenback pushing higher on promises of tax cuts and fiscal spending but "markets are now showing a healthy dose of scepticism because we still don’t have the details, we don’t know how he is actually going to achieve the goals he’s set out," said Borkin. "Until we get that information until markets are able to dissect it, we will remain in this holding pattern," he added.

She further reports, "New Zealand Institute of Economic Research senior economist Christina Leung also said she doesn't expect a "sharp easing" in the currency from Trump's presidency. "The continued solid growth outlook for the NZ economy should continue to support the NZD at a high level," said Leung. There will be some modest easing, however, as the US Federal Reserve continues to raise interest rates which will reduce New Zealand's yield advantage."

Technical levels to watch

In terms fo technical levels, upside barriers are aligned at 0.7236 (high Dec.14) and above that at 0.7303 (horizontal resistance). On the other hand, Stochastic (5,3,3), seems to start entering the overbought territory, therefore, further gains may be expected as long as the dollar awaits for Trump's fresh ammo. 

On the long-term view, the kiwi faces a critical resistance at 0.7217 (long-term 38.2% Fib) if dollar bulls lack the necessary strength to build an unbreakable barrier at this point, then the next logical target in this uptrend is located at 0.7339 (short-term 61.8%Fib). To the downside, 0.7125 (short-term 50.0% Fib) is the most relevant support at this stage, an open and close below this level indicates the dollar pullback may be over. 

AUD/USD analysis: rally can extend on positive Austrian inflation