Risk aversion brought pain to the Kiwi bulls last week. Will this week’s catalysts change the Kiwi’s fate?
Here are a couple of market events that could influence the comdoll’s price action:
ANZ business confidence (Nov. 2, 12:00 am GMT)
Business sentiment is one of the more closely-watched data points in New Zealand. In fact, a 12-point bounce from -50 to -38 helped traders get over a worse-than-expected trade last month.
Did businesses feel more confident in October? Or did other factors come in to drag confidence back down in New Zealand?
Take note that Australia will be printing a retail sales report during the report’s release so, unless we see significant surprises, we might see limited reaction to New Zealand’s report during the trading session.
Overall risk sentiment
Can’t ignore the most obvious of them all! Concerns over the U.S.-China trade war and its impact on global trade, as well as selloffs in the equities markets and dollar strength dragged high-yielding bets lower last week.
This week pay close attention for any follow through of last week’s selloffs. The NFP-related reports, for example, could remind traders of the Fed’s rate hike bias.
A string of manufacturing PMI reports could also highlight the impact of uncertainties surrounding Brexit and the U.S.-China trade war. Oh, and don’t discount any profit-taking ahead of the U.S. mid-term elections!
Last Week’s Price Review
Like the Aussie, the Kiwi’s two-week winning streak also looks set to end this week since the Kiwi is currently the second biggest loser of the week (as of 7:00).
And like the Aussie, the Kiwi is faring poorly this week thanks mainly to the prevalence of risk aversion and the Greenback’s overall strength.
The trading week started on an upbeat note but the Kiwi had a hard time attracting buyers, very likely because of Greenback strength at the start of the week.
The Greenback’s rally stalled on Tuesday, but the Kiwi wasn’t able to take advantage of that since risk sentiment switched back to risk-off during Tuesday’s Asian session and the risk-off vibes then persisted into Tuesday’s London session.
Risk-taking was still the name of the game during Wednesday’s European session, but the Kiwi was only able to extend its gains against the euro and the pound, likely because demand for the Kiwi was dampened since the Greenback caught a bid back then.
And sadly for Kiwi bulls, the Kiwi would eventually be forced to cede ground even to the pound and the euro when Wednesday’s U.S. session rolled around, likely because risk aversion made a strong comeback.
And to make matters worse, New Zealand’s trade report surprised to the downside, dragging the Kiwi even lower.
Risk sentiment finally recovered during Thursday’s London session, so the Kiwi tried to make its way higher. The damage was already done, however, and most NZD pairs stayed below last week’s closing prices (dashed, horizontal line).
And when Friday rolled around, risk sentiment switched back to risk-off, so the Kiwi slumped hard across the board again.