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NZD/USD Fed on hold, bulls looking for 0.6550s within bearish trend

  • NZD/USD moves out of immediate bearish territory as US dollar catches a bid.
  • NZD/USD holds above key support ahead of NZ Trade Balance.
  • The bearish trend is to cap flow towards 0.6550.

NZD/USD is climbing back above 0.65 the figure and back above an hourly support structure around 0.6520, meeting resistance at 0.6550. The range has been between 0.6505 and 0.6552 on a day where the Federal Reserve didn't upset the status quo and as traders now get set for the New Zealand Trade Balance

The Federal Reserve's announcements where nothing ground breaking whereby the central bank is on hold, albeit watchful of "incoming data including Global developments in muted inflation pressures." the most dovish thing that Governor Jerome Powell said in the presser was how uncomfortable he is with inflation persistently below 2%.

  • Powell speech: Fed is not satisfied with inflation running below 2% and it is not a ceiling

  • Although, prior:  Powell speech: Fed expects inflation to move closer to 2% over the next few months

FOMC keeps rates unchanged

  • Target rate remains at 1.5% to 1.75%.
  • Interest rate on excess reserves 1.6% versus 1.55%.
  • The decision is unanimous.
  • Fed says labor market stronger, economy rising at moderate rate.
  • Consumption moderate, investment and exports week.
  • Job gains solid, unemployment has remained a low.
  • Overall and core inflation running below 2%.
  • Fed leaves discount rate at 2.25%.
  • Market-based gauges of inflation compensation remain low.
  • Aims for inflation returning to symmetric 2% goal.
  • Reiterates plan to buy treasury bills into 2nd half of 2020.
  • Continue to conducting Terman overnight repo operations at least through April.
  • Survey based inflation expectations a little changed.
  • Current policy appropriate to sustain expansion.
  • Will continue to monitor incoming data including Global developments in muted inflation pressures.

There was a dovish tilt to the meeting and announcements within the statement, but there really isn't that much change to it.

Meanwhile, the USD has been trending a little firmer of late on continued safe-haven demand as the coronavirus spreads. While here was no change in policy guidance by the Fed, which was to be expected from the Fed’s first meeting of the year, despite the virus and lower prospects of reflation on a global scale, as this stage, the US dollar took a brief trip to the downside, correcting some of the recent rally, and the bird has subsequently found a higher perch between two key pivot points on the charts.  

A steady hand at the Fed and firm policy guidance to help underpin USD strength in the longer term

However, the steady policy guidance can help underpin USD strength in the longer term, and the upside in the greenback may be far from over, especially should the virus continue to weigh on market risk sentiment - god forbid any cases are discovered in either Australia or New Zealand which rely heavily on tourism, directly contributing around 5% of NZ Gross Domestic Product. 

New Zealand Trade Balance coming up

Trading New Zealand Dollar with New Zealand Trade Balance:

Each month Statistics New Zealand releases the trade balance figure. This is a very important economic indicator in Wellington and the rest of New Zealand. Essentially the New Zealand trade balance measures the difference between the value of exports and imports and is shown in millions of New Zealand Dollars.

This economic figure is used to compare the NZ trade activity with the rest of the world.

NZD/USD levels

Bulls are running through a key resistance and can target the 0.6550s within a bearish trend that commenced through the 0.6620s. 0.6470 is the next target to the downside. 


 

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