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NZD/USD consolidates ahead of Chinese PMIs

  • NZD/USD is consolidated in very quiet holiday markets as most traders head out to celebrate New Year's Eve. 
  • Tokyo and Shanghai are closed; volumes are light, but, Chinese PMIs are on the cards and Singapore, Hong Kong and the Aussies are around to trade the news. 

The bird is perched on the 0.67 handle awaiting a catalyst that may come in today's Chinese PMis considering the angst surrounding China's slowing economy and the health of the global backdrop as we head into the New Year. 

There have been some pretty impressive moves in the stock markets during illiquid markets this holiday season, so it would be prudent not to rule out last might price action into year end. European and US markets are scheduled to open and trade a full session, so any last minute squaring could see some movement. 

  • What's been happening over the holiday period and what can we expect for the first week of the New Year?

Domestically, it is quiet. The last bit of data came with consumer confidence ending the year on a buoyant note, rising from 118.6 to 121.9 in Dec. The recent gains were driven by "economy, one year ahead" in stark contrast to gloomy businesses, as analysts at TD Securities noted. Before that data, the September quarter GDP climbed by +0.3%/q, underwhelming all expectations while annual growth eased from 3.2% to 2.6%/y.

RBNZ outlook

Concerning the RBNZ, overnight index swaps have been pricing ~30% risk of a cut by Q4 2019. "There is no case to cut, but patience is required," the analysts argued. The RBNZ next meets on February 13, providing an update to its growth and inflation forecasts. "At this early stage, we see no need for Governor Adrian Orr to change his "wait, watch and worry" stance. TD expects the OCR to remain at 1.75% through to November 2019, with risks of slippage into 2020 if the Governor insists on keeping the cash rate unchanged through 2019 and 2020 no matter what the data outcomes are," the analysts explained. 

NZD/USD levels

Bears remain in charge at this juncture, and any previous aspirations from the bulls for a run towards the 61.8% Fibo at 0.7048 have flipped to the 23.6% Fibo at 0.6663. A break of the 100-D SMA is the first hurdle for the bears that sits just above the Fibo target. RSI and various indicators are leaning with a bearish bias, supporting the bearish outlook for forthcoming price action. 

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