The Kiwi attracted bulls last week despite shaky risk sentiment in the markets. Will it extend its uptrend this week?
Here are a few catalysts that might cause a wiggle or two in its charts:
Manufacturing index (July 12, 11:30 pm GMT)
We saw last week how a business confidence report can rock the New Zealand dollar. This week Business NZ will print its monthly PMI release.
The report fell from 59.1 to a 54.5 reading in May with the employment component dipping into contraction territory. Analysts are optimistic, however, that the numbers will jump back up after correcting from April’s strong readings.
Kiwi bulls and bears didn’t pay much attention to the overall risk appetite this week, but that doesn’t mean that it won’t be affected by the ebbs and flows of risk sentiment!
Over the next couple of days investors will most likely pay attention to how China will retaliate to the U.S. implementing its first set of additional tariffs on its goods.
If China’s response triggers another round of additional duties from Uncle Sam, then we might see traders flock to lower-yielding bets on renewed trade war jitters.
Last Week’s Price Review
After two weeks of being the biggest loser of the forex bunch, the Kiwi finally had a turnaround and is even THE top-performing currency of the week (as of 7:00 am GMT).
The Kiwi actually had a rather poor start, thanks to a broadly stronger U.S. dollar and the intense risk aversion on Monday.
Kiwi pair eventually found a bottom and most Kiwi pairs even began to tilt to the upside by Tuesday’s morning London session, very likely because risk sentiment recovered and the Greenback’s rally stalled.
Risk sentiment soured during Tuesday’s U.S. session but the Kiwi remained resilient, likely because the Kiwi was feeding off the Greenback’s continued weakness at the time.
Incidentally, the latest dairy auction resulted in a 5% drop for the GDT price index, but as you can see in the chart above, the Kiwi didn’t really seem to mind.
Moving on, the Kiwi traded roughly sideways on Wednesday, before getting a second wind and resuming its uphill trek on Thursday. And interestingly enough, there were no direct catalysts for the Kiwi’s renewed rally. And as noted in Thursday’s Asian session recap, risk aversion was actually the dominant sentiment in Asia.
The major Asia equity indices came off their intraday lows, however, which is a sign that risk sentiment was improving. And that eventually evolved into full-blown risk-taking when Thursday’s London session rolled around, which naturally helped to sustain the higher-yielding Kiwi’s rally.