The New Zealand dollar which has continued to remain under pressure in overnight trading and into the London session, as the reverberations from the election results continue to drive bearish sentiment, has been given further impetus overnight with weak economic data in terms of the Trade Balance figure and business confidence. And as now seems to be the norm with elections, the opinion polls once again failed to forecast the outcome, a pattern we have seen repeated in the US, the UK and Germany, and for New Zealand, uncertainty now lies ahead and whether a government of coalition can indeed be formed in the short term and mirroring what happened in the UK. For the NZD this has resulted in further weakness across the complex and with Business Confidence falling well below target at 0% against a forecast of 18.3% with a similar miss for the Activity Outlook at 29.6% vs 38.2%, this has added to the bearish sentiment and extending the trend lower on the NZD/JPY.
On the 60 minute chart for the pair, the trend monitor reflects this sentiment as the pair moves clear of the overnight volatility candle, with rising volume as the London session gets underway. The daily currency strength indicator also confirms this position with the NZD (grey line) turning sharply lower, and with the JPY turning up from the heavily oversold region, this is now developing a strong trend on the pair and breaking through key support at 80.80. With little potential support now below, the pair look set to test the 80.00 level in due course.
By Anna Coulling
Charts by NinjaTrader