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  • New Zealand Truckometer and Electronic Card Retail Sales data both point to a deceleration in economic activity in NZ in November.
  • Despite this, NZD/USD trades subdued ahead of Asia trade just above Wednesday lows around 0.7010.

NZD/USD has seen subdued trade just above Wednesday lows around 0.7010 over the last few hours, as NZD takes its cue more from global dynamics as opposed to domestic economic updates. For the most part, NZD traded as a function of USD and risk appetite, falling amid a somewhat risk-off feel to trade which saw the Dollar Index recover back above 91.00. Pessimism regarding a failure of any meaningful US fiscals stimulus negotiation breakthroughs to materialise is being cited as a reason for risk-off, though some desks have also noted pre-year-end profit-taking in risk assets (such as US equities, which fell on Wednesday) following a historically strong performance in November and into the beginning of December.

Downbeat data down under

New Zealand Truckometer data was released at 21:00GMT on Wednesday and showed a slight easing in traffic in the economy in November, consistent with a small drop in economic activity; the Heavy Traffic Index dropped 0.3% MoM in November and the Light Traffic Index dropped 3.1% MoM, however, both indices are still up substantially YoY.

Note, the Heavy Traffic Index primarily reflects the movement of goods, while the Light traffic captures the movement of people. In normal times, light traffic provides a lead on momentum in the economy, whereas heavy traffic is a real-time indicator of goods production.

“Some of the November weakness likely reflects that November is typically the first big month of the summer season for inbound tourism” comments ANZ, who concludes that “there are going to be a lot fewer people than normal in New Zealand over the summer, and that will show up in traffic”.

Elsewhere, Electronic Card Retail Sales numbers for November also showed a significant slowdown, dropping to a growth rate of just 0.1% MoM following October’s staggering 8.8% MoM rise. As noted above, however, NZD has been much more focused on USD dynamics and market risk appetite, and this is likely to remain the case going forward.

NZD/USD eyeing a test of 0.7000

To the immediate downside, NZD/USD is being supported by significant levels including the 25 and 26 November highs at 0.7015, the 27 and 30 lows at 0.7010 and the 7 December low at 0.7006. If risk appetite continues to falter and breaks down through these levels, a test of the 0.7000 is likely very soon and a break below this would open the door to a further move southward towards the pair’s 21-day moving average at 0.6973.