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Kiwi bounces off lows in one of the most volatile trading days on record

NZD - New Zealand Dollar

The New Zealand dollar enjoyed its 5th most volatile trading day on record on Thursday, tumbling 5% through the domestic session before driving higher in overnight trade. The NZD touched intraday lows at 0.5470 as panic among investors and the push for liquidity reached fever pitch before risk appetite improved in overnight trade. The ECB, Bank of England and RBA all announced extensive QE programs Thursday with the Fed creating a fund to bolster liquidity demands. The coordinated global monetary policy response helped calm bond and equity markets and fostered a bounce off oversold levels. The Kiwi touched intraday highs at 0.5880 before edging marginally lower into this morning’s open.

Attentions remain squarely affixed to global risk appetite demands as volatility across currency markets increases and investors dismiss macroeconomic data sets. Having bounced of lows we will be looking for a continued consolidation across markets and signs the recent overshot is ready to correct. Watch for supports at yesterdays low with resistance on moves approaching 0.59 /0.5930.

Key Movers

The Dollar index gained through trade on Thursday despite a mixed performance against major counterparts. Having pared recent gains against the AUD, CAD and NZD the worlds base currency advanced against the euro and Japanese yen as the ECB unveiled extensive QE support and risk sentiment forced the JPY lower. The ECB announced it would step up its bond buying program, committing to purchase an additional 80 billion euro per month into the end of the year. The 750-billion-euro package signals the fastest rate of bond buying in the ECB’s history, outstripping the measures adopted in the wake of the GFC. Falling through 1.09 the euro plunged to intraday lows at 1.0662.

Attentions remain squarely affixed to broader risk trends and with COVID-19 continuing its rapid spread across the world with a large uptick in new cases reported in the US Thursday we can reasonably expect demand for risk will remain subdued. However, the improvement in risk appetite on Thursday suggests a tentative stabilisation across currency markets could be at hand. Watch for stability across bond markets and a sustained recovery across equities as signals the recent overshot may begin to unwind.

Expected Ranges

NZD/USD: 0.5470 - 0.5930 ▲

NZD/EUR: 0.5010 - 0.5400 ▲

GBP/NZD: 1.9850 - 2.0950 ▼

NZD/AUD: 0.9780 - 1.0020 ▲

NZD/CAD: 0.8030 - 0.8440 ▲