New Zealand's economy has traditionally been based on a foundation of exports from its very efficient agricultural system: dairy products, meat, forest products, fruit and beverages. New Zealand imports mainly vehicles, machinery and equipment, petroleum, electronics, plastics and aircraft. Its main trading partners are: China, Australia, the US, Japan and South Korea.

Dairy prices took another step lower in last night's Global Dairy Trade auction. The headline index slid 2.8%, while whole milk powder prices were down 3.7%. Although lower prices were well signalled by futures markets, last night's confirmation will still come as a disappointment to the industry. Nonetheless, while disappointing, last night's auction was consistent with our recently updated farm gate milk price forecasts. (Dairy (Q2) in Australia and New zealand are forecasted a 1%-2% fall in Australian milk production in the year to June, New Zealand production is likely to be down around 2%).

Of the non-oil commodity exporters, NZD and ZAR should be the weakest. New Zealand's current account deficit will probably balloon from -4% to at least -6% in the months to come on lower dairy prices and still-strong import volumes.  For the whole of 2015, trade gap increased to 3.55 NZD billion compared to 1.20 NZD billion in 2014 and hitting its highest deficit since 2008.

Well, keeping important resistance (at 0.6723) in mind one can speculate this pair with binary one touch calls (beyond boundaries for 50-60 pips) but in the contrast advice for long-term investors is that don't get bull trapped in this pair as it is clearly dipping within a southward channel that has moved way below 21DMA on weekly as well. We are fairly positioned for bearish targets in 2016 and forecast for NZD/USD at 0.59 by Q1 of 2016 and 0.61 by Q4 of 2016.