NZD/USD hit 0.8214 on Friday, the pair’s lowest since December 4; the pair subsequently consolidated at 0.8228 by close of trade, 2.74% lower for the week.
Market sentiment remained under pressure as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called “Plan B” fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.
The pair is likely to find support at 0.8200, the low from December 4 and resistance at 0.8344, Friday’s high.
The index dipped to 72.9 for December from 74.5 the previous month, missing analysts' call for an improvement to 74.7 this month.
Adding to the negative trade environment, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales.
Monday, December 24
Markets in New Zealand will remain closed for Christmas Eve, while U.S. equity markets will close early at 13:30EST (18:30 GMT).
Tuesday, December 25
Markets in the U.S. and New Zealand will remain closed in observance of the Christmas Day holiday.
Wednesday, December 26
The U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on manufacturing activity in Richmond.
Thursday, December 27
The U.S. is to publish its weekly government report on initial jobless claims, as well as data on new home sales and consumer confidence.
Friday, December 28
The U.S. is to round up the week with data on pending home sales, as well as a report on business conditions in the Chicago area, a leading indicator of economic health. The country is also to release official data on crude oil stockpiles and natural gas inventories.
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