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NZD/USD: Holding firm despite strong dollar, 0.6950 to play for

  • NZD/USD has been very quiet on Monday in overnight markets, oscillating between 0.6901 and a low of 0.6867.
  • The pair is consolidated and remains elevated despite the pending risks associated with world trade, global growth and the forthcoming Fed meeting.

It is a busy calendar as far as the US week goes. Headline CPI could slip to 2.2%, largely on the oil price rout ,although, beyond the energy weakness, food prices have scope to jump and with a solid 0.2% print on core CPI on a pickup in core services, the y/y rate should come in higher at 2.2% and be a supportive data release for the greenback. Then, the retail sales will be a focus also, as will IP.

Risk-off environment

Analysts at ANZ Bank explained that "the NZD is likely to struggle to push higher in this risk-off environment, but whether it can make progress to the downside is another matter. It has been reasonably resilient through the latest equity malaise in part because the USD is effectively now a high quality ‘risk’ currency too."

Meanwhile, analysts at ING BANK who predict a Dec rate hike explained, that despite more headwinds for growth in 2019, such as the fading fiscal support, "strong dollar and protectionism fears, but for now, we continue to predict three further 25bp interest rate increases next year."

NZD/USD levels

  • Support 0.6850 
  • Resistance 0.6980

The bird recently penetrated the 50% Fibo of the 2018 downtrend although a break below the 200-D SMA located at 0.6855 risks a slide to the 38.2% retracement Fibo (at 0.6810). On a refocus of the upside, the bird can head towards the 61.8% Fibo at 0.7048. On the downside, S1 is located at 0.6839, S2 at 0.6817 and S3 is at 0.6787. 

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