NZD/USD recedes below 0.7100 despite upbeat New Zealand HYEFU forecasts

• NZD/USD prints mild losses while staying between 0.7090 and 0.7083 off-late.
• New Zealand Treasury forecasts higher GDP growth in 2020/21.
• Markets turn cautious ahead of US stimulus announcement, Fed and NZ GDP.

NZD/USD eases to 0.7088, down 0.06% intraday, during early Wednesday. In doing so, the kiwi pair pays a little heed to the New Zealand (NZ) Treasury’s Half-Year Economic and Fiscal Update (HYEFU). The reason could be traced from the traders’ cautious sentiment ahead of the US coronavirus (COVID-19) stimulus details and the Federal Reserve’s decision, not to forget the NZ Q3 GDP.

NZ Treasury expects average GDP growth for 2020/21 around 1.5% versus -0.5% previous forecast. The third quarter (Q3) estimation is 10.5% against +12.2% predicted in Q2. Further, the unemployment rate is anticipated to peak at 6.9% in Q4 2020, which was previously signaled at 7.8%.

Read: New Zealand’s Finance Minister: Economy to rebound strongly in 2021, outperforming Eurozone

US Treasury Secretary Steve Mnuchin, House Speak Nancy Pelosi and the Senate Majority leader Mitch McConnell are currently giving final touches to the much-awaited US aid package. While the decision is awaited, the latest headlines have been positive and favored the risks earlier. Also favoring the risks previous were the COVID-19 vaccine news and optimism concerning Brexit.

However, fears of the rising cases in the Northern Hemisphere and the Western tension with China restrict optimism. Also challenging the mood could be the generally observed pre-Fed trading lull.

Against this backdrop, S&P 500 Futures prints mild losses whereas stocks in Asia-Pacific look for a clear view.

While the stimulus is most likely and can help the Kiwi run higher, the Fed may snap the upside momentum afterward. Also, the NZ GDP Q3 is likely to recover from -12.2% to +13.5% QoQ and can please the NZD/USD bulls.

Technical analysis

While 10-day SMA offers immediate support around 0.7065, an ascending trend line from November 13, currently near 0.7050, will be a tough nut to crack for NZD/USD sellers. Until then, the 0.7100 threshold and the monthly high near 0.71200 remains on the bull’s radar.