Search ForexCrunch
  • A bout of NZD/USD strength has seen the pair break above Wednesday’s 0.7085 high and hit 0.7100.
  • The last time the kiwi hit these levels vs the US dollar was in April 2018.
  • Broad USD weakness, worsened by strong US PMI data, has spurred the move.

NZD/USD is putting in a solid rally on Thursday, and in recent trade burst above its previous weekly high (set on Wednesday) of 0.7085 and proceeded to cross briefly above the 0.7100 mark for the first time since April 2018. At the time of writing, NZD/USD trades higher by just under 0.4% or just over 20 pips at just below 0.7100. Broad US weakness seems to be behind the move, with other G10 currencies also rallying a similar amount versus the buck.

US dollar weakness lifts all ships (G10 currencies)

NZD is not the only currency performing well against the US dollar on Thursday. Indeed, GBP is up an even more impressive 0.9%, JPY is up 0.7%, while AUD, EUR and CHF are all up between 0.4-0.5% vs the greenback.

No specific catalysts appeared directly responsible for USD’s early decline on Thursday, though a recent batch of strong US services PMI data for November appears to have spurred further losses;

Markit released its final services PMI reading for November, which was revised higher to 58.4 from the preliminary estimate of 57.7, the highest reading in over five years. Shortly after, the Institute of Supply Management released their estimate of services PMI for November, which came in at a solid 55.9, only very marginally below expectations for 56.0. Importantly, the employment subindex remained above the 50 mark, implying that service sector employment was in expansion in the month just gone despite the worsening virus situation.

Going into the data, some had argued that strong numbers might be USD bullish as it might discourage the Fed from providing further accommodation at the FOMC meeting later this month. However, this has not been the case.

US equity markets were given a boost by the data, with the S&P 500 hitting fresh all-time highs in its aftermath. Risk on flows have also been seen in FX markets (benefitting the likes of AUD and NZD in particular) and hurting safe-haven USD.

NZD/USD continues stunning upside run

NZD/USD has rallied a stunning more than 7% since 3 November. For most of the last three weeks, the cross has conformed nicely to a bullish trend channel that, to the upside, links the 16, 18 and 24 November and 2 and 3 December highs. Indeed, the pair just hit the uptrend resistance of this bullish trendline, implying that gains are likely to temporarily slow. To the downside, the bullish trend channel links the 13, 19, 23, and 30 November and 2 and 3 December lows.

If NZD/USD does see a temporary setback, solid support in the 0.7060 area (the June 2018 highs) is likely to come into play. Meanwhile, if the pair continues with its bullish trajectory, a test of March 2018 lows just above 0.7150 are likely at some point.