- NZD/USD was the outperformer which took on a fresh six-month high of 0.6940 before edging back to 0.6920.
- Risk appetite was maintained and bulls kept plugging away right into the middle of the North American session as the dollar eased off as risk sentiment improved, which saw the NZD higher which continues to trade at the mercy of global forces.
- USD/CNH stays heavy so that helps NZD/USD and the Aussie as it heads into the RBA later today which could bring about some volatility in the markets.
While the US-China trade détente gives high-beta/EMFX sectors prop, what is going to be key from here is the Fed’s attitude to string market conditions and fewer headwinds associated with a possible solution to trade. However, for the meanwhile, we have a plethora of dovish sentiment which leaves the possibility of a tighter antipode/US spread to underpin the bird into the year-end and beyond on the back of the Powell put. We had Fed’s Kaplan joining the chorus of doves and warning that fiscal stimulus was masking weakness in global growth spreading to the U.S., proclaiming that 2019 could look much different than 2018.
Fed speakers falling in line with Powell
Fed’s Clarida and were also Quarles speaking. Quarles suggests that the market seems pretty clear what the Fed intends to do, saying that he is content with the recent repricing of the Fed curve and adding that they are “coming up to the bottom of the Fed neutral rate range. Clarida argued that the “Powell Put” is not a useful way to describe what the Fed is doing. Then, saying, “We are in a world where central banks, including the Fed, are focused on keeping inflation away from disinflation,” which sound a little dovish and more in line with the Powell put.
As for US data, the November US manufacturing ISM survey bucked the easing trend in various US activity data of late and firmed to 59.3 from 57.5, showing impressive resilience in the face of market volatility and high trade tensions.
“While the pace of ascent has slowed, the NZD is still being impacted by the positive tone left after the weekend’s G20 meeting, which sees it grinding higher. It won’t be a simple or easy path upwards, but that still looks like the most likely road at this stage,”
analysts at ANZ New Zealand Bank explained.
Key levels
- Support 0.6850
- Resistance 0.6950
The bird is now making a foundation above the 38.2% retracement Fibo (at 0.6810) of the 2018 sell-off from 0.7441 highs to 0.6427 2018 lows which the Kiwi can continue higher, now above the 200-D SMA and testing the 50% fibo 0.6922 target. Above there, the bird can head towards the 61.8% Fibo at 0.7049. However, below the 38.2% base, bears will have eyes on the 21-D SMA, now at 0.6663 with the confluence of the 23.6% Fibo.
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