Forex - NZD/USD weekly outlook: December 12 - 16

Investing.com - The New Zealand dollar edged higher against its U.S. counterpart on Friday, trimming some of the week’s losses after European leaders agreed on tighter fiscal controls in the euro zone, but the kiwi’s gains were capped by sustained concerns over the handling of the region’s debt crisis.

NZD/USD hit 0.7636 on Friday, the pair’s lowest since November 30; the pair subsequently consolidated at 0.7752 by close of trade on Friday, shedding 0.74% over the week.   

The pair is likely to find support at 0.7669, the low of November 15 and resistance at 0.7877, the high of December 8.

European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.

U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.

Meanwhile, investors remained cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market. 

Earlier Friday, official data showed that the U.S. trade deficit narrowed to USD43.5 billion in November, in line with expectations, from a deficit of USD44.2 billion the previous month.

In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.

In New Zealand, industry data showed that house price inflation rose to 1.1% in November after a 0.3% decline the previous month.

The greenback found support on Thursday after the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.

Earlier in the week, the Reserve Bank of New Zealand left its benchmark interest rate unchanged at 2.5%, citing “continuing difficulties related to sovereign and bank debt in a growing number of European economies.”

In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.

Italy and Spain are both set to auction government bonds in the coming week.

Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, December 12

New Zealand is to publish a report on consumer sentiment, an important indicator of economic health.

Also Monday, the U.S. is to publish official data on the federal budget balance.

Tuesday, December 13

The U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. In addition, the Federal Reserve is to announce its federal funds rate.

Wednesday, December 14

The U.S. is to produce official data on import prices and crude oil stockpiles.

Also Wednesday, the Organization of Petroleum Exporting Countries is to meet to discuss a range of issues regarding energy markets, including oil production levels.

Thursday, December 15

The U.S. is to release a flurry of economic data, including the weekly report on initial jobless claims and data on producer price inflation. The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.

Friday, December 16

The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.