NZD/USD makes it to our final watchlist post of the week as the Greenback’s volatility stays bid and a fresh catalyst from New Zealand may spark a short-term Kiwi move.
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Fresh Market Headlines & Economic data:
- US core inflation posts biggest gain in nearly 1 1/2 years
- U.S. weekly jobless claims fall to three-month low
- Canadian new house prices were down 0.1% in May, after remaining unchanged for three consecutive months
- BoE says British banks ready for no-deal Brexit, trade war
- Bank of England’s Carney speaks on Brexit, IMF job
- Foreign direct investment rise shows ‘no such thing’ as a large number of foreign firms pulling out of China
- Kudlow says U.S. expects China to start purchasing crops very soon
- Bitcoin falls sharply as Fed’s Powell flags ‘serious concerns’ about Facebook’s cryptocurrency
- OPEC sees lower 2020 demand for its oil, points to surplus
- ECB ready to ease again as inflation goal is ‘some distance away’
- Australia’s rate cuts, tax rebate helping economy, says central bank governor
- Japan Indices of Tertiary Industry Activity falls -0.2% to 106.8
Upcoming Potential Catalysts on the Forex Calendar:
- Fed Quarles speaks at 6:30 pm GMT
- U.S. Federal Budget Balance at 7:00 pm GMT
- New Zealand manufacturing index at 11:30 pm GMT
- China trade balance (tentative July 12)
- Japan industrial production & capacity utilization rate at 5:30 am GMT (July 12)
- European industrial production at 10:00 am GMT (July 12)
- U.S. PPI at 1:30 pm GMT (July 12)
What to Watch: NZD/USD
The U.S. dollar was hard hit after Fed Chair Powell’s testimony this week (further raised the odds of a July rate cut), prompting a change in the picture for many USD pairs. This was definitely the case for NZD/USD that was in a strong momentum move lower before the Fed Chair spoke on Wednesday, which quickly reversed and found legs to move further higher in today’s session.
But it looks like the pair is now finding resistance at a previous area of interest (around 0.6675) that held as support in June and July before being broken. The question now is whether or not this level will turn into a broken support-turned-resistance scenario?
If you’re a bull, then you’ll want to see a break of this area before going long, which may happen if the upcoming New Zealand manufacturing index update surprises with a better-than-previous/expected read. The upside may be limited though with strong resistance just ahead around the 0.6720 -0.6740 area, but if it can break that then the coast seems to be clear for the bulls.
For the bears, a disappointing New Zealand manufacturing index update could be the spark for a return to the previous momentum move lower, but with USD sentiment being weak at the moment, we won’t know if sellers would be quick to hop back in long Greenbacks. There are a few arguments though that could lead to a renewed move lower, mainly the better-than-expected U.S. CPI read today could stave off bets on a 50 bps cut from the Fed, there could be end-of-week profit taking, and longer-term traders may look at this pop higher as an opportunity to play the interest rate carry that currently favors the Greenback over the Kiwi.