Depressed in a choppy range around mid-0.7100s amid US dollar gains


  • NZD/USD stays pressed between 0.7146 and 0.7164 following its heaviest decline in a week the previous day.
  • The pair struggles for a clear direction as risk-on mood, RBNZ optimism battles the US dollar strength.
  • Updates from trading partner Australia can offer intermediate moves, coupled with risk catalysts, ahead of US NFP.

NZD/USD seesaws around 0.7155-60 amid Friday’s Asian trading session. The kiwi pair marked the biggest losses in seven days the previous day amid the broad US dollar strength. However, pre-NFP trading lull and a lack of major data/events at home seem to have confined the quote’s latest moves.

The kiwi pair’s latest moves, actually inaction, fail to respect the cautious optimism conveyed by the central bank governor of its largest trading partner. RBA Governor Philip Lowe struck economic optimism while also conveying no rate hike odds before 2024 in his latest testimony.

Read: RBA’s Lowe: Interest rates are going to be low for quite a while yet 

On Thursday, increasing odds for the $1.9 trillion covid relief stimulus from US President Joe Biden and upbeat employment-related data from America helped the US dollar index (DXY) to jump to the highest levels since December 01, 2020. Also favoring the greenback were downbeat figures from Europe and virus/vaccine improvement elsewhere. Furthermore, chatters that the market frenzy has another round to offer also backed the US dollar.

Amid these plays, the S&P 500 and Nasdaq 100 marked record-high close at the end of Thursday’s trading whereas the S&P 500 Futures struggle for direction by press time.

Moving on, RBA’s quarterly economic forecasts and Aussie Retail Sales may entertain traders ahead of the key US Nonfarm Payrolls (NFP) data for January. It should be noted that any major updates concerning the American aid package and/or retail rush, as well as virus/vaccine news, also have their direct impact on NZD/USD and hence shouldn’t be missed.

Read: Nonfarm Payrolls Preview: Dollar needs a strong number to keep rallying

Against this backdrop, analysts from the Australia and New Zealand Banking Group (ANZ) stay bullish as they said, “The Kiwi has made an about-turn overnight as the USD has stretched its legs amid higher interest rates and rallying equities, but it remains within well-established ranges. This recent fall is somewhat surprising given that the market has adopted the view that the RBNZ will be one of the earlier “hikers”, and given the performance of recent economic data. With that in mind, all eyes are on US employment data tonight. Nonetheless, having not completely broken down, we’re more inclined to characterize the overnight as merely a correction.”

Technical analysis

An ascending trend line from November 24, 2020, joins 50-day SMA, currently around 0.7145-40 to restrict the immediate downside of the NZD/USD prices.

 



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By Jonathan Prop

Jonathan Prop is an independent financial advisor. He has been working in finance for the last 20 years. After retiring early in his 40s, Jonathan decided to help others get to grip with financial markets, particularly his area of expertise - forex!

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