NZD/USD - A Report Brought to You by Q8 Trade
The NZD/USD is one of the major pairs in the Forex trading world. The pair refers to the number of US dollars (the quoted currency) needed to buy one NZD (the base currency).
The New Zealand dollar against the US Dollar is among the most traded Forex pairs.
The pair is trading on the New Zealand Dollar (NZD) and the US Dollar (USD).
The dollar is called the kiwi, not the fruit but a popular NZ bird, and its image is printed on the New Zealand dollar.
The history of the New Zealand dollar began when the government set up a team to investigate the decimal system of the currency. It actually implemented the system in 1963 and was used the following year, but it did not work long. In 1967, what was then known as the New Zealand dollar was replaced by the New Zealand dollar. Its value was worth $2.
The New Zealand dollar is one of the 10 most traded currencies in the global forex market because of its association with the commodity sector and the intervention of the New Zealand central to reduce its exchange rate several years ago.
In general, New Zealand has a transformative economy where it relied entirely on agriculture and now it has turned to the free industrial economy. New Zealand relies on international trade with its partners Australia, the United States of America, the European Union, Japan and China.
Moving back, New Zealand relied on a specific range of products that trade with international partners such as timber, meat, dairy, fish and small machinery. Due to the high demand for these products, the standard of living increased, especially after the wool crisis during the Korean War. The demand for New Zealand wool increased by the United States which purchased large quantities of New Zealand wool which then affected the strength of the New Zealand economy positively.
How is the value of the NZD/USD pair determined?
The value is determined by the New Zealand dollar. If the New Zealand dollar is $0.66, you need $ 0.66 to buy NZ $1. Of course, this value changes almost instantaneously over the five trading days.
What makes the NZD/USD interesting to trade?
The New Zealand dollar is tied to its economy and the New Zealand Reserve is taking action to maintain its value which is attracting investors especially as New Zealand is growing.
Is NZD/USD trading profitable?
In the beginning, you should know that trading a currency pair can be profitable but it varies according to your strategies, choosing the right time for both sale and purchase, determining the type of transaction well, diversifying your investments and other things.
In general, these reasons make trading in this pair profitable:
- Low margin: Due to the low margin, this is a long-term choice for long-term traders making short-term exposure vulnerable to fast and fierce movements.
- Volume: As we explained, the New Zealand dollar is among the top 10 currencies traded in the FX market making the pair attractive to investors and profitable.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What are the factors affecting the NZD/USD pair performance?
The New Zealand dollar is affected by several factors, led by interest rates by the New Zealand Reserve Bank whose decisions affect the performance of the New Zealand dollar and the Federal Reserve whose decisions affect the US dollar. When the Fed intervenes in open market activities to make the US dollar stronger, the New Zealand dollar may depreciate against its US counterpart due to the strength of the US dollar against the New Zealand dollar.
The New Zealand dollar is relatively high, so investors often buy the New Zealand dollar and fund it in a low-yielding currency such as the Japanese yen or the Swiss franc. Evidence of this was evident during the financial crisis when the New Zealand dollar fell nearly 50% against the Japanese yen during the Great Depression. As volatility rose, investors canceled these deals and the New Zealand dollar was one of the higher yielding currencies that declined in 2008 and 2009.
Other factors affecting the New Zealand dollar are dairy prices and tourism figures. New Zealand is the world’s largest source of whole milk which means that if milk prices rise, it is likely to support the New Zealand economy and then support the currency. The tourism sector is a key sector of the New Zealand economy. When numbers grow, the economy figures grow and the country’s currency rises.
New Zealand’s economy is indirectly linked to its Chinese counterpart. New Zealand is the largest exporter of powdered milk to China. In the event of any recession in China, demand will drop, leading to a decline in the price of milk and the New Zealand dollar as well.
Overall, the New Zealand dollar against the US dollar tends to have a positive correlation with the Australian dollar against the US dollar.
The most important data to be followed outside of New Zealand is the GTI milk index, as well as RBNZ meetings. In New Zealand, GDT readings should be followed to try to understand the future price action.
The most important data affecting the performance of the pair GDP in both countries, the rate of inflation, are often taken into account by the reserves of New Zealand and the Federal before setting the interest rate.
How can you trade NZD/USD via CFDs?
Many traders prefer to trade the New Zealand dollar against the US dollar through CFDs as it increases their ability to speculate on the movement of this pair without actually owning the currency.
For example, if you decide to trade the New Zealand dollar against the US dollar and expect the New Zealand dollar to appreciate against the US dollar, you Buy. If you think that the New Zealand dollar will fall against the US dollar, you are Selling. If your expectation is correct, you’ll get a profit by the price difference.
Let’s make a numerical example:
If the New Zealand dollar is trading at 0.6620 / 0.6630 and you have expectations that the New Zealand dollar will rise against the US dollar. You have bought 100 of this pair’s contract through CFDs at 0.6630.
After a while, the pair rose 30 pips and the new price is 0.6650 / 0.6660. You decided to close your deal by selling the 100 key CFDs at 0.6650.
You bought at 0.6630 and sold at 0.6650. The difference here is 20 points. Since you bought 100 CFDs in this pair, your earnings are 20x100 = $2000.
The base contract value here is (10,000 NZD).
Advantages of trading NZD/USD via CFDs
- Leverage: The value of the amount traded through the leverage can be increased in CFDs. The leverage allows you to raise the amount you have deposited for trading based on the type and value of the leverage used which will guarantee you greater profits.
For example: 1:30 leverage allows trading of $3,000 with a deposit of only $100.
- Increased trading opportunity: It is known that in the world of Forex trading you can make profits in the case of high prices but the situation is different in the CFD trading where you can make profits even in the case of falling prices.
Example: If you are trading on the New Zealand dollar against the US Dollar and there are negative reports from New Zealand, you think that the New Zealand dollar will decline so in this case you can open a “sell” deal. If your expectations are correct, Buy the underlying asset and in this case you will get a profit by the price difference.
- Hedging: CFD trading enables you to maintain your investments against any negative moves in the New Zealand dollar against the US Dollar.
For example, you trade in the New Zealand dollar against the US dollar and you have already bought some pairs at a high price but with weak New Zealand data, the New Zealand dollar is on the decline. You think you will lose, but no and this protects your own investment.
How to trade the NZD/USD pair with Q8 Trade?
- Select the financial instrument you want to trade:
You should choose to trade the New Zealand Dollar against the US Dollar. If you’re looking for other options, Q8 Trade offers you more than 300 financial instruments including Forex pairs, commodities, indices and stocks globally and locally. You can trade most of these tools through CFDs.
- Select the transaction type:
There are two types of deals, buy or sell. If you expect a high price, select the Buy transaction, if you expect to decrease, then select the Sell transaction.
- Enter the volume:
Enter the number of units you want to trade from the New Zealand dollar against the US Dollar.
- Select the risk management tools:
With this feature, you can take advantage of risk management tools such as Stop Loss and Take Profit offered by Q8 Trade where you can close your deal at the price you set, regardless of price fluctuations.
- Watch your deal:
Monitor your transaction, where you should track your earnings or losses first-hand, to minimize loss or make more profits.
- Close your deal:
If your transaction is not automatically closed due to profit taking or stop loss orders, you can manually close it when you want.
Why should trade the NZD/USD pair with Q8 Trade?
- You can trade the New Zealand Dollar against the US Dollar through leverage as it can increase the amount you trade and thus double your profits.
- The Q8 Trade offers a range of options for trading this pair which increases the diversity of your portfolio.
- Q8 Trade has a set of tools to help you understand the pair’s performance such as live charts, real-time prices, historical charts, an economic calendar for the most important events affecting the NZD against the US dollar, economic analysis and recommendations.
- There is no exchange charge when trading the New Zealand Dollar against the US Dollar through CFDs, in which case you do not actually buy the asset.