NZD/USD: Capped below daily trend line resistance
- NZD/USD extends the bearish run, pressured below the daily trendline and the 21-hour moving average.
- Markets are on standby for details of the phase-one Sino/US trade deal.
- US data disappoints, inline with Fed's neutral stance.
NZD/USD is making its tracks to the downside of the descending channel, topping in the 0.6630s and falling to a low of 0.6603. The pair is pressured below the 21-hour moving average as well. Meanwhile, markets get set for the details of a phase-one trade deal between the US and China.
Indeed, for the commodity complex, phase one of the US-China trade deal remains the focus. However, investors may be set up for disappointment. In the US session on Tuesday, news started to circulate that existing tariffs on billions of dollars of Chinese goods coming into the US are likely to stay in place until after the American presidential election.
"Any move to reduce them will hinge on Beijing’s compliance with the terms of a phase-one trade accord, people familiar with the matter said,"
a Bloomberg report explained.
This was followed up by tweets from various media channels quoting USTR Lighthizer and Treasury Secretary Mnuchin that US and China have no agreement for a future reduction in tariffs and that all aspects of the phase 1 trade deal with China to be made public on Wednesday.
"News of the deal has provoked a sense of optimism in markets, in contrast to the shadow from US-China relations. Combined with news that China is no longer being pegged as a currency manipulator, this has put upward pressure on the yuan," analysts at ANZ Bank wrote today, adding that there is a sense that recent developments will bolster global growth and that downside risks to trade may have subsided somewhat.
However, the analyst warned, that "scope for disappointment remains, with Phase Two of the deal – in which some key areas of contention will be hashed out – yet to be negotiated."
US data disappoints
As far as data went, the US December headline Consumer Price Index rose 0.2% MoM, bringing headline inflation to 2.3% YoY from 2.1%. However, core inflation was steady at 2.3% YoY. This was viewed as a little disappointing.
- US inflation reinforces the Fed neutral policy
"The Fed wants to support a recovery in inflation expectations and is happy to let inflation pressures intensify. As such, we expect that policy settings will remain accommodative for some time," the analysts at ANZ Bank explained.
The pair is pressured below the 21-hour moving, drifting lower in a descending channel on the shorter-term time frames as well as on a daily basis, below trendline resistance set in place from the 2019 Dec peaks in the 0.6750s. The 200-Day moving average comes in at the 0.6780s