New Zealand GDP at 2.4% is currently in an extraordinarily comfortable position inside constructed moving averages in successive order from 1 to 9 years. Averages range from 1.80 to 2.89 Current 2.4 mid point for example is located at 2.34. The last reported 2.4 however sits perfectly on a support / resistance point.
Yet the bottom is supported by 2.36, 2.25 and 1.80. The next topside points begin at 2.50, 2.58, 2.63, 2.70 and 2.81 and 2.84. The main driver to GDP is the 1 year oversold average at 2.89. The 1 year average for example won’t allow 1.5 to be seen or hold as it becomes far out of bounds. Only an outside event beyond New Zealand’s control would allow 1.5. The roughest point for GDP is located between 2.50 to 2.70 as 5 levels and averages provide significant headwinds.
Current 2.4 is above the 2, 3 and 4 year averages and below the 1, 5, 6, 7, 8 and 9 year. Despite headwinds between 2.50 to 2.70, all averages beside the 1 one year lack oversold or overbought status as 2.4 trades around the averages. While 1.5 is deeply oversold, 4.27 and 4.73 provide far overbought status.
To see GDP head to upper stratospheres then 3.05 must break higher. Overall, GDP is at the lower end of the range from 1.5 to 4.27.
Economically, as seen from CPI, Trade Ables V Non Trade Ables and GDP, the RBNZ lacks any reason to lower OCR.
From an NZD/USD exchange rate at 0.7000, NZD was introduced and free floated March 1985 at 0.4444. Since July 1996 or 20 years of monthly averages, NZD/USD closed above 0.8000 for 32 times and only since 2011. NZD/USD closed 99 months in 0.7000’s. NZD closed in 0.6000’s for 65 months and 47 months at 0.5000. NZD/EUR closed Friday at 0.6385, NZD/CAD at 0.9175, NZD/USD 0.7000 and NZD/AUD at 0.9374. The top heavy pairs are NZD/CAD and NZD/AUD. If exchange rates are the issue for the RBNZ and why the lower OCR statement then the target pair must be NZD/AUD as 13.00 billion of trade was conducted in the last year between Australia and New Zealand. Australia, Europe and China remain the big 3 trade partners in the last 2 years.
Brian Twomey, Inside the Currency Market, btwomey.com