NZD/USD hovers near 2 ½ high as NZ current account returns to deficit
- The NZD/USD rally continued after New Zealand released the quarterly current account data.
- The current account returned to a n$0.4 billion deficit from a record surplus of n$0.6 billion in Q2.
- The New Zealand dollar is one of the best-performing currencies in the developed world.
The NZD/USD is hovering near the April 2018 high as the overall risk-off sentiment continues. It is trading at 0.7100, which is 30% above the year-to-date low of 0.5475.
New Zealand current account deficit
New Zealand has had a lot of success in fighting the coronavirus pandemic. The country, which has a population of more than 5 million recorded just 25 deaths related to the virus. It achieved this by implementing rapid contact tracing and quarantining people with symptoms.
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As a result, the New Zealand dollar has been the best-performing currency in the developed countries this year. It has risen by 6% against the dollar this year, making it one of its best years in recent times. It rose in eight of the 12 months.
In a report today, the country’s statistics office said that the country’s current account went back to a deficit in the third quarter. The current account deficit increased to n$0.4 billion, after recording a $0.6 billion surplus in the previous quarter.
This performance was because of a rise in goods imports, which rose by more than $1.1 billion. It attributed this to the rising car imports. Still, on an annualised basis, the deficit narrowed to n$2.6 billion.
The increase in goods imports was partially offset by a surplus in the services sector. Services exports increased by n$270 million while imports fell by n$304 million. Travel and transportation services are responsible for 52% of the total services exports.
Meanwhile, the NZD/USD will later on react to the outcome of the Federal Open Market Committee (FOMC) meeting. Economists believe that the Fed will leave interest rates and the quantitative easing policies unchanged. Also, Jerome Powell will likely press congress to pass more fiscal stimulus to aid the economy.
NZD/USD technical forecast
The NZD/USD has been on a strong upward trend, as shown in the daily chart above. It is currently above the important support of 0.6800, where the price formed a double top in September. It is also being supported by the 25-day and 15-day exponential moving averages while the two lines of the Moving Average Convergence Divergence (MACD) are above the neutral level.
They have also made a bearish crossover, which is a sign that the pair’s reversal could be near. So, it is worth practicing in a free forex demo account before you go long.