Summary

• GDT price index rises by 4.9% vs 2.1% prior
• Second consecutive strong rise
• Despite the beat NZD remains lower on the day

The latest results from the fortnightly Global Dairy Trade (GDT) auction has seen a large increase in the milk benchmark. An increase of 4.9% comes after a 2.2% increase last time and the strong consecutive gains could be seen to suggest that the declines the index experienced in the 4th quarter of 2017 are being reversed. 

 The latest GDT results showed a large increase of 4.9%. The second successive strong gain for the milk benchmark. Source: xStation

Despite the beat, the New Zealand dollar has failed to rise with the Kiwi remaining lower across the board. Both the USD and CAD are the biggest gainers against the NZD, currently higher by around 0.4% on the day. 

 The NZD is lower on the day despite the GDT beat. Source: xStation

Whilst the NZDUSD is the most widely traded pair involving the Kiwi, the NZDCAD could be more interesting to watch in the next 24 hours. Tomorrow’s BOC decision is expected to see the bank raise rates for the 3rd time in 5 meetings. This could boost the Canadian dollar and impart downwards pressure on the pair. Price is near a potentially key resistance level at 0.9105 and today’s decline could be set to see a bearish engulfing candlestick form. 

 NZDCAD is sitting at a very interesting level with 0.9105 seen to be a potentially major line in the sand. Source: xStation

Another way of viewing it, would be to view this resistance as a potential neckline in an inverse head and shoulders setup. The head in this formation would be taken from the November low at 0.8640 and this gives a potential target of around 94.70 should there be a clean beak above the neckline at 0.9105. Whilst the BOC are expected to hike tomorrow, they may do so in a dovish way (or even keep rates on hold at 1.0%) and should this weigh on CAD then NZDCAD could be well placed to rally.