- NZD/USD extends correction from a multi-month high amid broad risk-off.
- Disappointing NZ GDT Price Index, upbeat US data added weakness to the pair.
- NZ Current Account acts as an immediate catalyst, trade/Brexit headlines will keep the driver’s seat.
Following its break of 13-day-old support line during the previous day, NZD/USD stays under pressure while trading near 0.6575 at the start of Wednesday’s Asian session. The pair took a U-turn from the multi-month top on Friday amid a pullback in risk-on sentiment. The mood worsened on Tuesday mainly by the hard Brexit fears from the UK as well as skepticism concerning the phase-one. The latest news that the Reserve Bank of New Zealand (RBNZ) will oversee financial stability by introducing a bank deposit offered a few upticks to the kiwi.
Chinese legal practitioners’ entry into the trade deal and the US President Donald Trump’s comments to keep using 25% tariffs a negotiating key for phase-two talks kept the trade fears on table. Though, major attention was given to the UK PM’s upcoming move to change the law that will crash Britain out of the European Union (EU) by the end of 2020.
Recently, the US Trade Representative (USTR) Robert Lighthizer crossed wires, via Fox News, while stating that the United States’ agricultural sales to China is expected to double and the phase-one China trade deal is totally enforceable.
On the economic calendar, New Zealand’s (NZ) fortnightly release of the GDT Price Index tumbled more than expected as demand from China drops on the closure of the tariff-free window. The key dairy data dropped below +0.5% forecast to -5.1% while the Whole Milk Powder (WMP) fell 6.7% to the US Dollar (USD) 3,099 per ton. Alternatively, a slew of data from the US including Industrial Production, Housing Starts and Building Permits all beat the expectations with upbeat outcomes.
While third quarter (Q3) readings of NZ Current Account, expected $-6.336 B versus $-1.106 B prior, can be considered as an immediate catalyst, the market will keep eyes on trade/political headlines for near-term direction.
Technical Analysis
Prices recently slipped below the 13-day-old rising trend line, indicating further fall towards 200-day Exponential Moving Average (EMA), at 0.6525 now. However, a pullback beyond 0.6585 can again push the pair buyers to target a monthly top near 0.6635/40.
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