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Kiwi range bound as trade deficit widens

By OFX

The New Zealand Dollar remains largely range bound through trade on Thursday, bouncing between intraday lows at 0.6502 and session highs at 0.6545. Despite ongoing equity market volatility and a far from encouraging trade balance print the NZD remains stubbornly resilient. While the trade deficit continues to widen on surging imports and ongoing prices pressures on milk and milk powder (new Zealand’s Primary export) the growth outlook remains solid and investors are far from panic stations.

The NZD remains well bid on moves approaching 0.65 and 0.6450 and appears to have fought off any deeper correction for the time being. That said, much like its antipodean counterpart, there remains little appetite to significantly extend upside moves with drives toward 0.6550 and 0.66 likely to meet selling pressure as investors look to take profits.

While equity driven risk appetite will guide broader demand for the Kiwi, attentions now turn offshore as US GDP and Consumer sentiment data drive direction into the weekly close.

The Australian Dollar is higher overnight after opening the morning clinging onto support at 70.60 US cents. With the focus squared on equities this week, tech shares drove markets higher as the Nasdaq rebounded aggressively in trade overnight, pulling risk sentiment with it.

Futures on the SPI200 point towards a 1% increase on open as we saw the AUD/USD peak just below the 71 US cent handle in North American trade, a level unable to be breached this week as a narrow sideways pattern emerges between 0.7050 and 0.7100.

With a lack of domestic data this week, investors look towards the release of United States Advanced GDP for Q3 which looks to be the highlight of the evening. The Australian dollar opens this morning at 0.7080.

The Great British Pound throughout the Asian session on Thursday remained under pressure and stayed below the 1.3 handle vs the Greenback on the back of renewed US Dollar buying interest. The safe-haven U.S dollar has attracted nervous investors, due to increasing geopolitical tensions including U.S and China, the outcry over the killing of a Saudi journalist in Turkey and the increasing tension between Putin and the United States. Washington has said it wanted to withdraw from a key nuclear weapons control treaty with Russia since it was confident Moscow has violated it.

In the early North American session news broke via Bloomberg that “Brexit talks are said to be on hold as May's team can't agree”. In a knee jerk reaction the cable was sold off further and touched an eventual low of 1.2810. Britain departs the EU at the end of March, and the uncertainty surrounding Brexit is likely to continue to weigh on the pound.

Looking ahead, there are no local data releases thereofre invetors will likely look offhsore for direction with the upcoming US GDP figures due for release. The numbers are expected to be solid which could put further pressue on the Sterling.

The United States Dollar remains relatively range-bound in overnight trading, appreciating a marginal 0.27% to 96.6 on the US Dollar Index. In what has proven to be a lacklustre economic calendar, the themes of the week continued to play a part on Thursday trading with volatility in equity markets affecting market sentiment in a number of financial markets.

The economic calendar did have some release’ of note however with month on month core durable goods orders posted overnight. The result was ultimately poorer than expected however which didn’t help the Greenbacks case. Despite the setback, the USD did find some support from the new vice-chair of the Federal Reserve Richard Clarida who gave his first speech yesterday. Tellingly, he gave a fairly upbeat view of the US economy and noted that “some further gradual adjustment in the policy rate range will likely be appropriate”.

The Greenback was also well supported by volatility in equity and bond markets with both appreciating overnight. Earnings from some big tech stocks such as Twitter, Microsoft and Tesla led the S&P500 to rally. Nevertheless the overall trading environment remains volatile which saw the US Dollar well bid.

Moving into Friday the Greenback turns to advanced quarter on quarter GDP figures for direction and will keep a close eye on equity markets.

The Euro is weaker this morning when valued against the U.S. Dollar falling to a fresh low of 1.1355 following the European Central Bank monetary policy' meeting the risk of a no-deal UK departure from the European Union. European Central Bank President Mario Draghi said on Thursday the longer Brexit talks drag on, the more the private sector will have to prepare for the possibility of Britain crashing out without a deal.

On the data front yesterday we saw the release Germany business confidence survey which slipped to 105.9 from 106.6 the previous month amid growing concerns about trade disputes and other economic issues. Looking ahead today and the macroeconomic calendar in the EU with all eyes on the US release of the first estimate of Q3 GDP, foreseen at 3.3% vs. the final Q2 4.2% reading.

From a technical perspective, the EUR/USD pair is currently trading at 1.1373. We continue to expect support to hold on moves approaching 1.1340 while now any upward push will likely meet resistance around 1.1400.

The Loonie retreated against the greenback overnight, giving up a portion Thursdays rate hike induced gains. USD/CAD traded between 1.3015 and 13096 and we open this morning Sydney time at 1.3073 heading into the Friday session.

Second tier data out of the domestic economy on Thursday saw Canadian average weekly earnings (nonfarm) rise by 2.9% on a yearly basis in August whilst oil prices rebounded allowing the US crude price to rise 0.8% touching $67.35.

Recent moves imply new technical levels to consider. On the downside, we see USD/CAD being relatively well supported at the 1.3000 level in the near term whilst topside moves are expected to meet resistance at the 1.3150 handle.