NZD/USD: where now, back to base or a bid coming?
- NZD/USD blue sky rally over?
- NZD/USD bears look to a break of 0.7230.
NZD/USD has been hit on the turnaround in the greenback post-Trump's comments about wanting a strong dollar. Currently, NZD/USD is trading at 0.7299, down -0.41% on the day, having posted a daily high at 0.7343 and low at 0.7291.
Forex today: what a ride, Trump ruins the day
NZD was running higher from 0.7265 this week in a continuation of the bullish trend to the aforementioned highs, bit today's pullback has been the largest decline since the rally began back in Dec from 0.6840.
analysts at ANZ explained that the kiwi had its wings clipped yesterday, although it has squeezed a little from its low in line with the overall weak USD theme. "And that highlights the key question: will domestic factors (which argue for a lower NZD) take over, or will direction continue to be dictated by the USD? It still looks like the latter at this stage."
NZD/USD CPI an anchor
The CPI data was a big disappointment. The Dec qtr CPI rose by +0.1%/qtr, below TD at +0.3% and well below market at +0.4/+0.5%, and below that expected by the RBNZ in Nov (+0.3%). Analysts at TD Securities noted that as a reminder that their RBNZ base case - May and Nov - is not about the data, but the upcoming RBNZ PTA that incorporates the expanded mandate, "i.e. what the definition of “maximum employment” is as well as what the policy decision process is."
Heads will now turn to the US GDP. The Atlanta Fed GDPNOW on January 18th update stood at 3.4%. The current Bloomberg consensus forecast is 3.0%. The official advance estimate of Q4 GDP growth will be published by the BEA tomorrow.
NZD/USD levels
With support located at 0.7330 and resistance at 0.7440, NZD/USD has the blue sky rally has been capped, with plenty of downside on the cards. A break lower looks to the 16th Jan double bottom of 0.7230/40 guarding 0.7120. To the upside, bulls need to be clearing 0.7450 previous top of H&S shoulders that then opens 0.7520 July 2017 highs.