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NZD outperforms on stronger Chinese yuan

NZD - New Zealand Dollar

The New Zealand dollar was the best performer on the day, as it rose from 0.6620 to 0.6657 during overnight trade. The Australian dollar also performed well, initially breaking through the 0.7200 handle to touch intraday highs of 0.7209, before retreating to levels around 0.7175 during trade. In the cross, the NZD outperformance saw the AUD/NZD cross fall about 50 points to 1.0800.

With US economic data mixed and only modest gains in global equities, NZD and AUD strength overnight is being attributed to a stronger Chinese yuan. With the Chinese economy faring much better than the US and Europe in response to COVID-19, the CNY had its best quarter in 12 years in Q3 and continued its ascent by rising 0.4% against the greenback overnight.

Looking to the day ahead, we have domestic consumer confidence data and retail sales data from across the pond. We then look offshore to euro area CPI data, which is expected to show a modest recovery before rounding out the session with US labor market data.

NZD/USD traders will be looking at 0.6680 as the next level of resistance after overnight moves. A break through this level could open up moves to 0.6700 and beyond.

Key Movers

With mixed US economic data and zero progress on the US fiscal stimulus package, the USD index finished the session slightly lower. EUR/USD was able to rise from 1.1720 to 1.1770, with USD/JPY also rising from 105.45 to 105.75. As we touched on above, USD/CNY rose 0.4% to continue its ascent, and took the AUD and NZD along with it.

The European commission commenced its legal proceedings against the UK overnight. The proceedings against the UK are centered around Prime Minister Boris Johnson’s plan to override core parts of the UK’s withdrawal agreement from the Eurozone. The GBP initially fell sharply on the news, however it only finished down 0.2% on the day, despite displaying a wide trading range between 1.2820 and 1.2980.

Expected Ranges

NZD/USD: 0.6580 - 0.6680 ▲

GBP/NZD: 1.9390 – 1.9620 ▲

AUD/NZD: 1.0740 - 1.0850 ▼

NZD/CAD: 0.8770 - 0.8850 ▲