NZD breaks key technical resistance handle; is this finally the start of an extended rebound?
Daily Currency Update
NZD - New Zealand Dollar
The New Zealand dollar outperformed the majority of counterparts through trade on Tuesday, buoyed by a resurgence in risk appetite and a correction across haven assets. The NZD charged through 0.71 US cents, extending to mark intraday highs at 0.7170 and closing in on the September peak. Having broken back above 0.71, a key technical marker and the 200-day moving average, resistance on moves above 0.7170 and approaching 0.72 cents will likely firm. We are looking to see a consolidation in the recent upswing to better determine whether this is merely a temporary risk rally or the beginnings of a broader upward correction. Our fair value estimates have the NZD sitting between 0.73 and 0.7420 US cents, yet persistent pandemic driven headwinds continue to suppress its value. Having made a number of attempts to extend back toward this handle since June, we are watching direction closely into the end of the week.
Key MoversSafe haven currencies were the day's big losers on Tuesday as a risk rally drove the USD, JPY and CHF all lower. The dollar index fell 0.4%, allowing the euro to extend gains beyond 1.16 to touch 1.1640 and the pound to push back above 1.38. A continued correction in US treasuries have dampened demand for the USD through the last 5 days as markets re-adjust expectations for Fed policy in 2022. A string of softer than anticipated domestic macroeconomic indicators through Q3 and persistent shortages in workers and raw materials as supply bottlenecks narrow are prompting traders to downgrade monetary policy tightening forecasts. Despite a relatively hawkish Fed outlook, there is an expectation the impacts of the delta outbreak will linger through H2 2022. Our attentions remain affixed on the November policy update from the Fed as a critical marker for near term direction.
Our focus today however turns to UK CPI data. With markets firming bets on a BoE rate hike, today's print will go along way in defining near term direction. There is a concern that an interest rate hike will do little in correcting the current stagflation crisis and will only dampen the UK economic recovery, perhaps adding downward pressure on the GBP.
- NZD/USD: 0.7070 - 0.7230 ▲
- NZD/EUR: 0.6090 - 0.6210 ▲
- GBP/NZD: 1.9080 - 1.9420 ▼
- NZD/AUD: 0.9510 - 0.9620 ▲
- NZD/CAD: 0.8750 - 0.8920 ▲