The New Zealand dollar has been on a steady decline since January, following the trend of other currencies against the USD as the spread of the coronavirus continues to impact the global economy.
However, after hitting a two-month low of 0.6453, it is now holding steady at the start of the week, trending along the 0.6463 mark on the 30-minute timeframe.
Similar to the AUD, the Kiwi dollar is seen as a more high risk and volatile currency, which has led traders to drop it in favour of traditional “hard” currencies such as the Japanese Yen.
The NZD does appear to be performing better than the AUD though, due to the latter’s relationship to China. While New Zealand also enjoys an increasingly close relationship with China, the fact that China comprises a large volume of Australia’s exports leads to it being in a uniquely vulnerable position. There is also the factor of it having a higher interest rate of 1%, giving it another advantage over the Aussie's 0.75%.
The New Zealand Treasury is also expecting a slower gross domestic product growth in 2020. With the release of its monthly economic indicators report, it indicated that there was an optimistic outlook for the economy due to the positive showings in both December and January, but also acknowledged the threat that coronavirus still poses over the global markets.
Mr (not Dr) Phil had this to say about the NZD:
“With the Kiwi weakening due to New Zealand's relationship with China, we have started to consolidate on the M30 timeframe as we approach the Daily resistance which could offer us new support.”
For more analysis from Mr Phil about the NZD, watch his video here, or on Instagram at blackbull_markets. We upload content daily, such as our Trade in 60 seconds, where we discuss a different market every day in under a minute, as well as our Whiteboard Wizards series, where we break down the basics of trading.