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Kiwi unwinds gains as risk off mood dominates direction

Tuesday 14 December, 2021

Daily Currency Update

The New Zealand dollar fell through trade on Monday, unable to maintain Friday’s extension back through 0.68 as a risk off mood forced global equities lower and investors toward haven currencies. Having given up 0.68 the NZD fell steadily through the later stages of the domestic session, continuing the selloff overnight and slipping below 0.6750 to touch intraday lows at 0.6745. Having unwound much of last week’s recovery our attentions now remain squarely affixed on this weeks Fed policy update. We expect policy makers will accelerate the pace of QE tapering with a view to begin normalizing monetary policy settings come the middle of 2022. With market expectations elevated there is ample scope for volatility leading into and out of this key risk event. If the Fed and FOMC somehow fail to deliver we can expect another correction in near term NZD value. We are watching key support at 0.67 and resistance on moves above 0.68/0.6830 with a broader value range between 0.66 and 0.71 leading into 2022.

Key Movers

Safe haven currencies carried the day on Monday, buoyed by a definitive fall in risk sentiment across equities and currencies. The JPY, CHF and USD all led gains as commodity currencies propped up the bottom of the major currency leaderboard. A wave of new Covid infections sweep Europe and the US fears the Omicron variant will again derail the global economic recovery enveloped markets. While we have enjoyed only anecdotal evidence to date there is growing research to suggest a 3rd vaccine booster is required to properly fight this new strain. With plenty of risk events crowding the macroeconomic calendar this week’s investors appeared content in correcting positions. Our attentions turn central bank commentary from the Fed, European Central Bank, Bank of England and Bank of Japan. With the USD expected to be stronger for longer this week’s policy updates will go a long way to shaping near term USD/JPY, GBP and Euro direction. With the Fed expected to begin hiking rates from the middle of next year a dovish surprise or failure to meet market expectations could prompt a short-term correction in recent USD upside.

Expected Ranges

  • NZD/USD: 0.6690 - 0.6830 ▼
  • NZD/EUR: 0.5950 - 0.6020 ▼
  • GBP/NZD: 1.9450 - 1.9720 ▲
  • NZD/AUD: 0.9420 - 0.9520 ▼
  • NZD/CAD: 0.8630 - 0.8690 ▼