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  • US data not quite on the mark so far, a weight on teh greenback: FOMC minutes now eyed.
  • NZD/USD key support 0.6680 below 0.6750 and key resistance 0.6850 above 0.6800.

NZD/USD has been able to seek out the 0.68 handle on a soft dollar as full market return with NY traders back in after the 4th July holiday. The bird took flight from 0.6750 and has managed a score of just 2 pips below the 0.68 handle.

The DXY was -0.31% by the close of play in European markets. Stocks are making for a fickle tone with a complete reverse of the initial downside in the benchmarks. However, China is going to be essential with respect to the high beta plays, albeit the Kiwi less so than the Aussie, (Chinese stocks to drop over 15 percent in a month – causing some selling in the dollar, while 27bp has been wiped out off the yield on the long bond and the DJIA is losing near 5 percent in the last two weeks).  

Locally, the RBNZ hinted at a greater preparedness to act last week and the OIS market has reacted accordingly; crossing the psychological barrier and pricing in some chance of an OCR cut, as explained by analysts at ANZ Bank New Zealand Limited (“ANZ”):

“We think the market can ultimately push this closer to 50:50, although with limited (major) domestic data until Q2 CPI and the NZD doing a lot of the work in easing financial conditions, it is probably more of a slow grind from here,” adding, in terms of the Kiwi,  “We certainly find it hard to get upbeat here especially with one of the last legs of support – export commodity prices – now looking shaky too, but some technical indicators are suggesting NZD/USD is oversold and we do wonder when heading into US holidays and the Northern Hemisphere summer whether positions will be lightened.”

US data:  the has beens and to come: FOMC minutes now eyed

In terms of data today, we had the ADP report and Services ISM as key along with the ISM non-manufacturing. The greenback slipped further after the latest ADP report showed that the US private sector added 177K new jobs during the month of June. The headline reading fell short of consensus estimates, pointing to an addition of 190K new jobs, and also worse than the previous month’s figure of 178K. The US final June Markit services PMI came in at 56.5 vs 56.5 expected while the  June ISM non-manufacturing arrived at 59.1 vs 58.3 expected.

Now eyes turn to the FOMC minutes. Analysts at Nomura offered a preview as follows:

“The June FOMC meeting largely met our expectations, with the Committee raising the target range for the federal funds rate, and generally reiterated the positive US economic outlook We expect the minutes to provide additional insight into the Committee’s deliberations on longer-term monetary policy questions as well as the potential downside economic risks arising from US trade protectionism.  

Specifically, the Committee’s decision to remove forward guidance language from the post-meeting statement may have been accompanied by an interesting discussion during the meeting. Moreover, Chair Powell’s surprising announcement that a press conference will be held after every FOMC meeting, starting in 2019, may also have engendered an interesting discussion. “

NZD/USD levels

0.6680 is the key support while 0.6850 is the first key upside target on a continuation of the reversal through the 200-hr SMA at 0.6785 where the price is holding above. Only a break above 0.6850 would alleviate the downside pressures and eyes remains towards 0.6675. On the wide, while below the key 200-month moving average resistance at 0.7007 longer term technicals remain bearish.