Dairy auction today to test Kiwi/Dollar wedge

Today another dairy auction is scheduled in New Zealand, which might decide the mood of Kiwi, heading into non-farm later the week.

• Dairy is the most vital among key exporting commodities of New Zealand, accounting for almost 405 of the total commodity exports. New Zealand produces about 1/3rd of global milk.
   
• In the last auction, on 20th October dairy prices dropped -3.1%, reversing some of the positive gains in last four auctions, if the trend continues and increases pace, serious doubts would be over future outlook.
   
• Nevertheless, latest report from ANZ shows, in spite of last drop, dairy prices were up close to 18% in October, with whole milk powder leading the way (26%), followed by skim milk powder(14.1%) and butter (7.8%).

Technically speaking, New Zealand Dollar after gaining from 0.624 to 0.689 against Dollar has moved into consolidation and forming a wedge and today could be crucial test for the wedge as auction approaches followed by third quarter employment report at 21:45 GMT.

New Zealand Dollar is currently trading at 0.672 against USD, finding resistance at downward sloping upper band of the wedge.

While support line has been tested twice, one time on Reserve bank of New Zealand's (RBNZ) monetary policy, resistance line has been tested seven times so far, suggesting there could be a drop towards 0.662 in the near term.