NZD/USD on the verge of a break down to May 2016 lows?
- NZD/USD downside playing out on the broader theme.
- NZD/USD eyes a break for 0.6680 May 2016 lows?
NZD/USD has started to stabalise at the 0.6880 support level as the dollar firms up in the NY session on the back of inline ADP as a solid preview for this week's nonfarm payrolls on Friday. Elsewhere, we have had a lack of domestic drivers for the Kiwi although yesterday's milk auction had GDT PI +0.4% and WMP +1.7%, making for a short-lived bid.
Indeed, the focus instead stays with the Fed next week and the US economy in general with politics supporting the greenback of late. There is optimism over a 20% corporate tax cut and the need for the Fed to continue its path of normalisation throughout 2018 and into 2019. The dollar could well be in for some action over the course of this month and should market makes up their minds that the only way is up for US rates, the higher betas, such as Kiwi could be in for some trouble.
Recent US data:
- US: Non-manufacturing sector grew at a slower rate in November - ISM
- US: Service sector output expansion softens to 5-month low - Markit
- US: Private sector employment increased by 190,000 jobs in November - ADP
- Support 0.6860
- Resistance 0.6920
0.6840 is a key support area ahead of 0.6815-20 that are guarding a break of the 0.68 handle towards the 17-month low level of 0.6780. However, the strong recovery last week as a 50% recovery left the pair neutral, (daily RSI and The Momentum indicators confirming a neutral outlook still), at just below the 200-hour SMA at 0.6879 where the pair is bound to. The key target to the upside stays with the 28th Nov double-top highs of 0.6942 while 0.6820, if broken, could be a catalyst for 30th May 2016 territory on the wide down at 0.6680.