N.Z. Dollar May Drop 28% on Technicals, Goldman's Edgeley Says

By Candice Zachariahs

Oct. 28 (Bloomberg) -- New Zealand's currency may weaken 28 percent against the U.S. dollar, said Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc. in London, citing charts used to predict price movements.

The New Zealand dollar fell 18.5 percent since Sept. 30, heading for the biggest monthly decline since 1984. The kiwi, as it is nicknamed, closed below 55.45 U.S. cents yesterday, the 61.8 percent retracement level of its advance from a 2000 low of 39 U.S. cents. The currency rose to a 26-year high of 82.13 cents in March.

A close below 55.45 U.S. cents would be ``confirmation for further acceleration and a longer term move back to full reversal to 39 cents,'' wrote Edgeley, citing daily, weekly and monthly stochastic and trend strength indicators.

New Zealand's dollar traded 0.4 percent higher at 54.33 U.S. cents at 8:27 a.m. in Tokyo from 54.14 yesterday. It bought 50.58 yen from 50.22 yesterday.

The currency has plunged 29 percent against the dollar and 41 percent versus the yen this year as concerns about a global recession hammered down prices for commodities the nation exports and forced investors to dump higher-yielding assets like those of New Zealand.

Interest Rates, Commodities

A benchmark interest rate of 6.5 percent, compared with 0.5 percent in Japan and 1.5 percent in the U.S. had made the nation a favorite for investors seeking higher returns. Raw material sales abroad make up 70 percent of New Zealand's overseas shipments.

The Australian dollar shows ``a similar pattern'', wrote Edgeley, with the break below 67.15 U.S. cents confirming a move to 47.75 cents. The currency traded at 60.32 cents from 60.13 yesterday.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Fibonacci analysis uses a mathematical formula based on the theory that prices rise or fall by certain percentages after reaching highs and lows. A break of a Fibonacci level indicates a currency may move to the next. A failure suggests a trend may stall. Fibonacci points include 50 percent and 61.8 percent.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net