Time For A Kiwi TPP Party?
Today’s Spotlight Market
The New Zealand Dollar has remained relatively strong throughout the years after the 2008 financial crisis. Unlike the Federal Reserve in the United States, the Reserve Bank of New Zealand has been actively raising and lowering rates over the past few years in response to economic conditions in New Zealand. Prior to the 2008 financial crisis, rates had peaked at 8.25%. During 2015, rates have dropped from 3.5% down to the current 2.75%, mostly due to declining commodity prices as well as fears of a slowdown in China.
Fundamentals
Trade agreements can often be controversial and a multilateral agreement such as the Trans Pacific Partnership is no exception. New Zealand, as a relatively isolated country, could benefit under the TPP. Agriculture is an important component of the New Zealand economy. The TPP will give New Zealand?s important dairy exports better access to the United States, Canada, and Japan and potentially eliminate some tariffs. Tariffs on beef exports, another important industry, are eliminated across the TPP region with the exception of Japan. In total, the TPP will eliminate tariffs on approximately 93% of New Zealand?s trade with TPP partners.
Technical Notes – View Today’s Chart
Turning to the 3 month continuation chart, we see an impressive recent rally by the New Zealand Dollar. The recent rally is preparing to test resistance at .6697. If the New Zealand Dollar breaks through this resistance level, then the previous resistance often becomes a new support level. Another bullish sign is that the New Zealand Dollar is trading well above the 20 and 50 day Simple Moving Averages (SMA). The 20 day SMA has turned up and is preparing to cross the 50 day SMA. If this occurs, it would another bullish confirmation. Finally, 14 day RSI is extremely bullish at an overbought 92.72.
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