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NZD/USD volatility picking up around the key 38.2% Fibo

  •  NZD struggled to find friends overnight in a challenging environment for kiwi. But moves may be fickle, with plenty of event risk on the horizon.
  • NZD/USD is currently sinking with a bid in the greenback, taking the bird down from the 0.68 handle to a recent low of 0.6779.
  • NZD/USD is currently trading at 0.6785, up from the overnight lows of 0.6751.

The bird is running into supply at the top of the flash cash reversal's rally in a broad-based bid in the dollar that has climbed from the 95.20s to the 95.45s in a correction of the sharp sell-off screened at the start of the day following Fed Bostic's and Evan's dovish remarks, which could be a prelude for what is to follow from a wave of Fed speakers slated to speak this week. 

The latest comments from Bostic:

  • No urgency to make policy changes 'just to run to a number'
  • Fed needs to strongly signal that it's not locked into a trajectory
  • Policy could move in either direction
  • Open to cut if downside risks all come to bear
  • Comfortable 'hanging out' near neutral level while the Fed takes stock of how the economy is responding to higher rates
  • Hearing from businesses across the board that they have become cautious about 2019
  • Evolution of economy should dictate Fed's next move
  • Meanwhile, on the domestic front, the New Zealnd Dec Job ads dropped 3.5%, but in annual terms remain firm at 6%, implying steady demand for labour.

"We do think it’s shaping up to be a challenging environment for sustained kiwi strength. There’s plenty of event risk that could incite volatility in coming days,"

analysts at ANZ Bank explained.

For the next catalyst today, markets are getting set for the FOMC that will be releasing the minutes of its December meeting. "We will look for differences in the FOMC members' views on the economy and markets, especially after indications last week that the Fed may go about its monetary tightening more gradually," analysts at Danske Bank argued.

NZD/USD levels

Support 0.6540 Resistance 0.6780

Bulls had taken back the 38.2% Fibo of 0.6810 bu t struggle to hold on. Uo above, the 50% Fibo is located at 0.6929 guarding the December high of 0.6969. On the flip side, a break of the 100-D SMA at 0.6680 with daily closes will sure up the negative bias again, especially on a break back below the 23.6% Fibo. 


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