The New Zealand economy keeps finding itself between a rock and a hard place on the charts as it economic data continues to disappoint as ANZ business confidence came in weaker than the previous month with a reading of just 7. The previous month was 23.0 and many were looking for some sort of sign of improvement but it seems more and more certain now that the Reserve Bank of New Zealand (RBNZ) will be forced to act in the coming month in order to help prop up the economy and expectations in the market are starting to build over there action. Also adding fire to the situation is the upcoming milk auction and many are analysts are expecting this also to be weaker and not provide any real good news at all with China slowing down and global demand still remaining weak for commodities.
On the charts the NZDUSD continues to flirt with support at 0.6556 and this is a key level here for the market to test. On top of this the 50 day Moving average is also looking to hold back any movements lower, but it's pushing lower and it may soon act as dynamic resistance rather than support in this market environment. Any dips lower are likely to be held up at 0.6459 which is going to be a major level of support and the market will be looking to utilise any levels to slow things down, but with the RBNZ likely to make a move the market could be left shaken and pushing back towards the 61 cent mark again.
The mixed bag out of Japan as of late is causing the usual headaches on the markets as the USDJPY continues to slide down the charts and Abenomics starts to becomes less pretty. It is still one of the greatest economic experiments of our time and the market is still very much unsure on the outcome of it all. Recent retail sales data y/y came in weaker at -0.1% (0.3% exp) which is not a strong signal for the Japanese economy but at the same time preliminary industrial production was more positive than expected at 3.7% (3.3% exp). All in all, the capital expenditure data tonight will be watched closely for signs of weakness.
On the charts the recent double bottom on the daily chart is likely to be treated like a floor in the market, and many will now be considering there options from a technical perspective as the USDJPY is likely to try and climb higher if we see another bounce on this level. I would also not be surprised to see the Bank of Japan come and be more vocal if we saw heavy pressure on this key area. Either way if we do see a breakout higher I would expect resistance to kick in at 114.030 and we may even see the 20 day moving average even used as dynamic resistance albeit brief as it does have a history of failing when it comes to Yen trading.
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