Will Kiwi extend its winning streak this week? Here are catalysts that might trip up the bulls over the next few days.
With only days ahead of the meeting between Donald Trump and Xi Jinping, traders will watch their newswires closely for any updates that might point to some form of trade deal between the U.S. and China.
We know that high level officials from both the U.S. and China are now talking, but that the U.S. wants to see an offer before the meeting while China wants to keep its cards close to its chest until the event.
Keep your eyes peeled for any speculations that might affect high-yielding currencies like the Kiwi!
While Fed members are still fired up to raise their rates another time in December, some members (see below) aren’t as hawkish as many had expected them to be.
It also doesn’t help that the U.S. equities markets are taking hits from anticipation of higher borrowing rates in the near future.
Last but not the least, traders who are holding on to their dollars might start to take profits ahead of the Thanksgiving/holiday season.
Watch your charts closely in case we see momentum in the dollar’s weakness that could push its major counterparts (like the Kiwi) higher!
Last Week’s Price Review
The Kiwi is THE top-performing currency again (as of 8:00). Wow! That means that the Kiwi has been dominating ALL its peers for three straight weeks already.
Risk aversion was actually the dominant sentiment this week, but positive trade-related news and Greenback weakness likely allowed the Kiwi to just shrug off the risk-off vibes.
The Kiwi found buyers from the get-go, likely because of the risk-friendly vibes during Monday’s Asian session.
Risk aversion returned during Monday’s London session, though, but the Kiwi stayed resilient and even caught a bid on most pairs, thanks to China’s relatively upbeat Trade Situation Report.
And interestingly enough, the Kiwi also put up a good fight even as risk aversion persisted into Monday’s U.S. session, so much so that the majority of NZD pairs closed out the day in positive territory.
Anyhow, NZD bulls got their second wind when the Wall Street Journal (WSJ) released a report claiming that U.S. Treasury Secretary Steven Mnuchin and Vice Premier Liu He had supposedly discussed restarting trade talks.
The Kiwi’s bullish momentum then picked up the pace after the South China Morning Post (SCMP) released a report since the report affirmed the WSJ report while also adding that Vice Premier Liu He will be going to the U.S. to restart trade talks, although trip hasn’t been scheduled yet.
The Kiwi did stumble a bit when Chinese Foreign Ministry Spokesperson Hua Chunying confirmed those trade-related rumors, probably because of profit-taking. A “buy the rumor, sell the news” scenario, basically.
However, dip demand for the Kiwi was ever-present and the Kiwi steadily marched higher across the board for the rest of the week, despite the prevalence of risk aversion because of Brexit.
Incidentally (well, not really), the positive trade-related news caused the Greenback to slide broadly lower for the rest of the week, which very likely helped to sustain demand for the Kiwi.