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NZD/USD: All eyes on US data, but the Fed is key driver

  • NZD/USD drifts its way into 2019 following a turbulent end to the year for risk.
  • Markets getting set for nonfarm payrolls.

The bird has been trading in tandem to the performance of global equities and has managed to find support on a slide in the dollar into year-end with the rate complex weighing heavily for the greenback. Domestically, the most recent data came with consumer confidence ending the year on a buoyant note, rising from 118.6 to 121.9 in Dec. Such 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

"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. 

Regardless of the jobs data, analysts at ING Bank reckoned that officials will "tread a more cautious path with intensifying economic headwinds coupled with the fact the Fed is also running down its balance sheet meaning we expect two 25bp rate hikes in 2019 versus the four experienced in 2018."

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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