• NZ business confidence and outlook deteriorated substantially in October
  • NZ dollar is on the back foot being the weakest performer in G10
  • Chinese PMIs improved in November but the stock markets in Asia dropped

There is no doubt that the NZ dollar has had tough times of late mainly on the back of politics which have lowered confidence in the economy leading to a capital outflow. Even as the pair tried to break its key resistance line earlier this week, it failed to do so and today’s fresh data seems to be in line with further depreciation of the kiwi.

link do file download linkBusiness confidence in the NZ economy slumped in the past month. Source: Macrobond, XTB Research

According to ANZ business confidence deteriorated massively in the past month as the index plunged from -10.1 to as low as -39.3. On top of that, activity outlook weakened as well as the index fell from 22.2 to 6.5. In addition, the New Zealand currency got a blow from the real estate as building permits dropped 9.6% mom in October while the prior reading was revised down from -2.3% mom to 2.5% mom. Besides, traders could be cautious due to tomorrow’s financial stability report from the central bank which will be accompanied by the testimony of acting governor Grant Spencer before a newly formed parliamentary select committee. Last but not leas, sentiment across the equity markets in China hasn’t been the best which could encourage investors to get out of longs from risk-related assets. 

link do file download linkThe NZDUSD failed to break a downward trend line and sellers took control afterwards. The closest target might be found at around 0.68 and once this level is beaten, it could lead to deeper falls toward 0.6680. Source: xStation5

Looking beyond New Zealand it’s worth looking at China where, despite quite decent PMI readings, stock markets have declined. Manufacturing PMI for November came in at 51.8 compared to the prior print at 51.4, in turn non-manufacturing PMI was also stronger coming in at 54.8 against 54.3 seen last month. Nevertheless the Chinese equity markets have had a bleak session as they’ve dropped noticeably. The Shanghai Composite is trading 0.85% lower while the Hang Seng (CHNComp on xStation5) is plummeting as much as 1.6%. The main cause of a drop cited by the business media was a slump seen in the month’s best performers which in turn declined following a sell-off in the NASDAQ (US100). Notice that the US100 plunged 1.3% while its peers were little changed as the SP500 (US500) ended the day flat and the Dow Jones (US30) added 0.4%.

link do file download linkThe Hang Seng (CHNComp) has slumped another session in a row, however buyers could lurk in the vicinity of a key support zone placed at 13500 points. Do notice that this level is underpinned by a lower boundary of an ascending channel and therefore bulls could try to take control on the price anew. Source: xStation5