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NZD/USD slips from 11-week top under 0.6300 amid risk reset

  • NZD/USD steps back from 0.6304 amid fresh tensions from the US.
  • US President Donald Trump takes action to mobilize the military, resources in taming the riots.
  • New Zealand’s Q1 Terms of Trade Index came in weaker than forecast, Building Permits recovered.
  • RBA, qualitative catalysts will be the key to watch for immediate direction.

NZD/USD defies the previous day’s run-up while declining to 0.6290 amid the early Tuesday morning in Asia. The kiwi pair seems to bear the burden of risk reset following the worsening civil unrest in the US. Though, sellers are still cautious ahead of the key RBA and the previous day’s broad US dollar weakness.

With the geopolitical unrest in the US getting severe, US President Donald Trump announced to mobilize all available Federal Resources, Civilian and Military, to stop the rioting and looting. Even so, news of the protesters near the White House take rounds. As a result, the S&P 500 Futures drop nearly 0.50% to 3,039 by the press time.

Market’s risk-tone sentiment stayed positive the previous day as traders cheered no fresh sanctions on China by US President. While the risk-on mood favored the Antipodeans, the weaker US dollar also offered helps to the NZD/USD pair. The greenback weakness seems to have taken clues from the broad optimism surrounding the likely turn in the US-China relations, economic restart and downbeat US data.

Recently, New Zealand’s first quarter (Q1) Terms of Trade Index slipped below 1.3% forecast to flash -0.7% whereas April month seasonally adjusted Building Permits recovered to -6.5% from -21.7% prior.

Considering the lack of New Zealand data up for publishing, the kiwi traders will keep eyes on the Aussie catalysts, as being the figures from New Zealand’s largest customer. Among them, the RBA will be the key to watch. While the Aussie central bank isn’t expected to alter current monetary policy, any upbeat signals relating to the economic performance, as earlier hinted by the RBA Governor Philip Lowe, could favor the pair to extend the latest rise.

In addition to the data/events, geopolitical tension in the US will also be important to watch as it will directly affect the market’s risk-tone and the Antipodeans in turn.

Technical analysis

A confluence of a two-week-old rising wedge and 200-day SMA seems to restrict the pair’s immediate upside around 0.6315/20. As a result, overbought RSI might play its role to drag the quote towards the formation support near 0.6215. However, a downside break of 0.6215 will confirm the bearish technical pattern and could please the bears with a sub-0.5900 area.


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