- NZD/USD opened the week on the bid with a broad-based bear gap in the dollar across the charts in what is set to be a very illiquid market today hit both Sydney and Hong Kong out.
- NZD/USD is currently trading at 0.6618 having been as high as 0.6622 and as low as 0.6615.
“We had the release of the Chinese data over the weekend, but the main focus in the commodity-complex stays with NAFTA – U.S. and Canadian officials were nearing a deal Sunday afternoon on rewriting the North American Free Trade Agreement, hoping to complete the new accord by the U.S.-imposed midnight deadline, according to people familiar with the discussions” – WSJ.
“U.S. Trade Representative Robert Lighthizer and White House adviser Jared Kushner planned to brief President Donald Trump on Sunday on progress in talks – Lighthizer and Kushner have been briefing Trump through the weekend on the intense bilateral negotiations on updating the North American Free Trade Agreement, said the source, who was not authorized to speak about the talks publicly,” – Reuters.
U.S. and Mexico reached a trade accord, but the US and Canada have, so far, been unable to find common ground over such sticking points as dispute panels and access to dairy markets that have stymied U.S.-Canada progress. However, Friday was Candian dollar friendly on the headlines whereby the Mexicans have insisted that NAFTA remains a trilateral deal – bullish for the commodity sectors/FX.
Eyes will turn to US/China trade spat once NAFTA noise is silenced on a trilateral deal
However, it will not be too long when the market moves over to China again and the ongoing trade spat with the US. Indeed, the dollar was the top performer last week on both counts of a firm delivery from Powell with respect to the Fed’s course of policy normalisation with another hike expected before the year is out and at least three hikes in 2019 if not a fourth so long as the economy warrants another. The US economy is running on all cylinders and in stark contrast to that of China’s. In fact, we got weaker Chinese PMI figures over the weekend – a potential sign that the negative effects of US tariffs are kicking in – The September official China PMI for manufacturing arrived at 50.8 vs. 51.2 consensus estimate and down from 51.3 in August as the slowest since February – not good.
Analysts at ANZ argued that this may put the NZD initially on the back foot.
“While we remain strategically bearish on the NZD’s direction, we do think the NZD is becoming vulnerable to a squeeze higher.”
NZD/USD levels
The analysts may have a fair call there as the bird seeks out fair-value on the charts, rising from the lows of 0.66 the figure, (a 50% fibo extension level of the early Sep extension’s retracement down at 0.65 the figure to 0.6699, the 21st Sep high). However, the correction was capped at 0.6639 on Friday, (the 38.2% fib of same 0.65/6699 range) and the bulls need to get above there, clear the stops territory for a continuation to the upside. Immediate support is located at 0.6590 and key target resistance is at 0.6720 – 4hr RSI is biased higher while the weekly struggles to around 36.
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