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Forex - NZD/USD weekly outlook: December 24 - 28

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Investing.com - Investing.com - The New Zealand dollar ended the week close to a three-week low against the broadly stronger U.S. dollar on Friday, as hopes for a deal to avoid the U.S. fiscal cliff crisis ahead of the year-end deadline dimmed, weighing on demand for risk-sensitive assets.

NZD/USD hit 0.8214 on Friday, the pair's lowest since December 4; the pair subsequently consolidated at 0.8228 by close of trade, 2.74% lower for the week.

The pair is likely to find support at 0.8200, the low from December 4 and resistance at 0.8344, Friday's high.

Market sentiment remained under pressure as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.

Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called "Plan B" fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.

The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. Without a deal, the U.S. could fall back into recession and drag much of the world down with it.

On the data front, the University of Michigan's consumer sentiment index slumped unexpectedly to a five-month low in December, possibly due to fears the U.S. will careen over the fiscal cliff.

The index dipped to 72.9 for December from 74.5 the previous month, missing analysts' call for an improvement to 74.7 this month.

Adding to the negative trade environment, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.

The news prompted investors to shun riskier assets, like stocks and high yielding currencies, and move in to safe-haven assets, such as the U.S. dollar and Treasurys.

The kiwi came under pressure on Thursday after official data showed that New Zealand's economy expanded by 0.2% in the third quarter, below analysts' forecasts for 0.4% growth.

In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.

Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, December 24

Markets in New Zealand will remain closed for Christmas Eve, while U.S. equity markets will close early at 13:30EST (18:30 GMT).

Tuesday, December 25

Markets in the U.S. and New Zealand will remain closed in observance of the Christmas Day holiday.

Wednesday, December 26

The U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on manufacturing activity in Richmond.

Thursday, December 27

The U.S. is to publish its weekly government report on initial jobless claims, as well as data on new home sales and consumer confidence.

Friday, December 28

The U.S. is to round up the week with data on pending home sales, as well as a report on business conditions in the Chicago area, a leading indicator of economic health. The country is also to release official data on crude oil stockpiles and natural gas inventories.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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