NZ Q4 GDP and what comes next for AUDNZD?

In the September quarter, NZ GDP printed at -3.7% q/q, following an outbreak of Delta in mid-August that prompted a return to lockdown until mid-November.

A solid 3.6% rebound in activity is expected in the December quarter, reflecting the reopening and a broad-based recovery led by the production of physical goods. This would exceed the RBNZs forecast of 2.3% and see the NZ economy sign off the year with growth of 5.8%.

Looking forward, the picture for 2022 is not as bright.

Higher mortgage rates and reduced credit availability have weighed on the housing market. Elsewhere, the Omicron outbreak has resulted in self-imposed lockdowns like Australia's in January.

Voluntary or non-voluntary home isolation exacerbates labour market shortages, undermines consumer confidence, creates supply chain issues, and supports higher inflation.

Like several central banks currently caught in the middle of a tug of war between surging inflation and the building downside risks to growth, the RBNZ is expected to continue tightening interest rates to stifle inflation at every meeting this year.

The preferred way of playing this continues to be via short AUDNZD, which recently completed a double top at 1.0796, up against multi-month trend channel resistance from the 1.1043 August 2020 high.

Should the cross see a sustained break of horizontal support 1.0650 area, a deeper pullback is likely towards the middle of the trend channel 1.0500 area in the coming weeks. Aware that a sustained break above 1.0800 invalidates the bearish bias.

Source Tradingview. The figures stated areas of March 15th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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