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The Kiwi clocked in back-to-back gains last week. Will this week’s catalysts push it to its third strong week?

Dollar and risk sentiment

Since New Zealand won’t be printing top-tier economic reports, it’s likely that bulls and bears will once again take cues from overall risk sentiment and the Greenback’s direction.

We already know from last week’s FOMC announcement that the Fed is still on track to raise its interest rates in December.

We’ll see just how much hawkish some of the members are when 2018 voters like San Francisco’s Daly, Brainard, Quarles, Atlanta’s Bostic, and Governor Powell himself are scheduled to give speeches over the next couple of days.

Meanwhile, a relatively light trading calendar in the major economies can return the investors’ focus on global concerns such as the U.S.-China trade war, Brexit, and the impact of higher interest rates on equity markets.

Last Week’s Price Review

The Kiwi is the one currency to rule them all this week (as of 8:00), which is a repeat of last week’s strong performance.

And the demand for the Kiwi was sustained, thanks to another risk-friendly week, as well as New Zealand’s strong jobs report, and the Greenback’s weakness during the first half of the week.

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

The Kiwi  had a steady start, likely because there were signs of risk aversion during Monday’s Asian sessionHowever, risk-taking ramped up during Monday’s London session, so the Kiwi began trading higher.

The Kiwi also likely benefited at the Greenback’s expense since the Greenback began encountering sellers during Monday’s U.S. session because of uncertainty surrounding the U.S. midterm elections.

Anyhow, risk aversion returned on Tuesday, so the Kiwi took hits during Tuesday’s Asian session. However, the Greenback continued to weaken in the run-up to the U.S. midterm elections, which is probably why the Kiwi was well-supported.

Fortunately for NZD bulls (and sadly for NZD bears), New Zealand’s jobs report surprised to the upside, which caused the Kiwi to skyrocket across the board.

And as icing on the cake, the Greenback continued to weaken since there were indications that the Democrats would take control of the U.S. House of Representative, which likely helped to sustain demand for the Kiwi.

The Kiwi also got a bullish boost later when it became official that the Democrats were able to secure the needed 218 seats to take control of the House.

After that, the Kiwi steadily trended higher on most pairs. And as a side note, the RBNZ announced its latest monetary policy decision on Wednesday, which caused the Kiwi to toss and turn.

However, the event was mostly a dud since the RBNZ’s projected path for the OCR was unchanged, so the RBNZ still sees no rate hike until Q3 2020 (at the earliest).

Interestingly enough, the RBNZ also removed its forward guidance that:

“The direction of our next OCR move could be up or down.”

The RBNZ still seems to have a neutral policy bias, though, since the RBNZ highlighted the upside and downside risks to New Zealand’s economy and concluded that:

“[T]he timing and direction of any future OCR move remains data dependent.”

Anyhow, the Kiwi’s rally would stall on Thursday, probably because risk aversion returned during Thursday’s London session and because the Greenback regained its mojo, thanks to the FOMC statement.

Risk aversion also persisted during Friday’s Asian session, so the Kiwi continued to take hits.

Most NZD pairs are still well above last week’s closing prices, though, so the Kiwi is headed for another win this week.