Apr 2, 20224 min read

NZDUSD Analysis (Apr, 2022) US Economy Heating Up!

The global pandemic has had huge underlying effects across the globe with countries needing to adapt to new ways of living. Unemployment rates was a major indicator hit by the pandemic spiking to just under 15% meaning at least 1 in 10 people during the pandemic were unemployed.

Fast forward two years unemployment rate has dropped down back to a healthy rate of 3.6%.

On top of this the U.S. had created 431,000 jobs meaning the economy was recovering and growing at speed... a potentially inflationary sign on top of the existing monetary and fiscal stimulus.

Inflation can have a bearish effect on the base currency meaning will the U.S. dollar continue to depreciate during this period?

Logikfx Technology Summary

Throughout the analysis we'll be referencing the currency strength meter (macro scores) and the technology summary to give us a fundamental directional bias. What this page does is cover the main fundamental indicators of a chosen pair.

In this case we can see that NZDUSD is looking bearish on a fundamental level.

The main indicators are all showing bullish signs with only interest rates at a flat neutral bias.

What this means as a trader is we can focus on the bullish signs in NZDUSD, filtering the market noise to increase confidence.

Macro currency strength meter

The macro currency strength meter is our strongest baseline to gauge economic fundamental strength of an economy/ currency.

What we've identified in the past two months is that the NZD started off bearish but took a turn of events switching to a bullish bias during from March.

During the same period USD started to take a bearish turn as fundamental data suggested it may take a bearish hit.

This created a crossover in the recent week where NZD has become strong but USD weak, creating a fundamental bullish bias.

GDP Differentials

The GDP differentials also started showing bullish signs, although, the differential is still within a negative region you can see that the gap is closing causing the differential to grow.

Ideally, you'd like to see the green line above 0 meaning it's a positive differential, however it's very close showing that New Zealand is starting to close the gap in growth rates compared to the United States.

Trade Analysis (Imports/Exports)

STU Steel & Tube Holdings - Steel & Tube Holdings Limited is a New Zealand-listed company that was established in 1953 with the merger of Stewarts & Lloyds of New Zealand, The Iron & Steel Company of New Zealand and McLean & Todd to form a steel company with a national reach.

A major exporter within New Zealand of the raw materials.

We can see over the past year that STU has had a bullish year growing in price.

During the same period we saw NZDUSD fall in value... with the most recent data showing a potential correction/bearish move in STU we may expect NZDUSD to grow as it continues to follow an inverse correlation. This would agree with the bullish bias from the currency strength meter.

AIR - Air New Zealand Limited is the flag carrier airline of New Zealand. Based in Auckland, the airline operates scheduled passenger flights to 20 domestic and 32 international destinations in 18 countries, primarily around and within the Pacific Rim.

The pandemic had a huge negative effect on the airline industry which is why there's no surprise AIR has yet to recover, countries are still in and out of lockdowns with the virus and variants still prominent. Australia/ New Zealand were countries with weaker vaccination programmes too which meant countries will not accept foreign travellers without it.

This negative growth in combination with a negative correlation suggests that actually NZDUSD may be in for a downwards correction.

Exxon Mobil - Exxon Mobil Corporation, stylized as ExxonMobil, is an American multinational oil and gas corporation headquartered in Irving, Texas.

Based on the side by side comparison we can instantly identify a negative correlation.

NZDUSD falls as Exxon rises and vice versa.

Oil prices overall have seen huge surges in prices across the world suggesting oil companies are seeing huge profits, especially if they bought oil at low prices when they slumped earlier last year.

The month to month growth shows a slight fall in price for Exxon suggesting if it follows the same trajectory we may see NZDUSD go for a bullish move.

Interest Rate Differentials

Overall, the interest rates for both New Zealand and United States are holding the same rates which creates a neutral bias.

Hedge Fund Positions (COTA)

The Hedge fund positions is one of our sentimental indicators to see whether the markets agree or disagree with ideas.

In this case we can see the differential is still positive which is a great sign but the bad sign is it's falling.

The NZD has just fallen below 0 meaning hedge funds actually have more sell positions than buy positions. Ideally, we'd like to see hedge funds have a positive open interest here meaning the solid blue line above 0 as this would indicate they have more buy positions than sell positions.

Stock Market Analysis

The NZX50 is one of New Zealands top indices which tracks the top 50 companies in New Zealand.

The results are fairly alarming as it shows the stock market isn't fairing so well, what we'll be doing is keeping a close eye on the NZX50 to see whether there are any market gains suggesting a bullish move for NZDUSD.