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NZD/USD is perched on a fragile branch, struggles to break higher

  • NZD/USD has plenty of headwinds against its northerly trajectory.
  • Technically, the bird is failing at a key resistance for a third attempt.

NZD/USD is trading at 0.6100, +.01% on the day as we head into the early Asian open. The pair has traded between a range of 0.6083 and 0.6108 on what has been a lacklustre start for the FX space considering US and UK holidays.

NZD/USD will be caught up in a pending war of words in coming days pertaining to the US-China tensions which remain elevated. We have trade wars moving to the fore along with the Hong Kong headlines. Also, the opening of economies and subsequent risks of additional waves of the coronavirus are included as contentious issues.

“We have lifted our NZD forecasts over 2020 to reflect the positive impact of liquidity and positive sentiment surrounding the global reopening for business. But we still see some gradual depreciation,” analysts at ANZ Bank explained. “Risk markets are now priced for perfection, leaving NZD vulnerable to a global slowdown.”  

We also believe a lot of good news is now priced in (just look at equities!) and expect NZD to be under pressure as unemployment rises everywhere and global growth slows. Support 0.5850 Resistance 0.6170.

Hong Kong a major risk

Meanwhile, China’s proposed national security legislation for Hong Kong could lead to US sanctions which are set to roil markets should the legislation go through. Beijing, meanwhile, warned of a “new Cold War” with the United States. China states that the US had been infected by a “political virus” compelling people there to continually attack China.

These statements come as the US continues to scale up its condemnation of the proposed law. Mike Pompeo, US secretary of state, on Friday has called Beijing’s plan to bypass Hong Kong’s legislative processes a “death knell” for the territory’s autonomy.

Such provocation from both sides is a war of words and leads some observers defining this is a cold war between the US and China – a major risk for currencies such as NZD. 

ND/USD levels

The bird is testing key resistance but has failed here for a third attempt. The resistance correlates with a 61.8% Fibonacci of the late Jan drop in the mid 0.61s. 0.62 will likely be a strong level of resistance higher up. 





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