NZD/USD perky in early Asia as US dollar meets firm resistance, 0.6540s on bull's radars
- NZD/USD perky in early Asia as the US dollar could well give back territory in immediate sessions.
- RBNZ's hawkish lean should remain supportive to the bird, much will depend on the developments in the coronavirus.
- China's Hubei province confirms another 1,933 new cases of coronavirus and 100 new deaths as of Feb 16th.
NZD/USD has opened today a tough firmer in a bullish short term ascending triangle, trading around 0.6440 a the time of writing following a tight range on Friday between 0.6423 and 0.6444. The focus has been with the coronavirus as the total number of coronavirus cases in mainland China reaches almost 70,000.
China's Hubei province confirms another 1,933 new cases of coronavirus and 100 new deaths as of Feb 16th while China’s National Health Commission this weekend, confirmed 142 additional deaths as of February 15th. However, there is a sense in the markets that the virus can be contained which has lead to increase risk appetite supporting the commodity complex, enabling a bottoming in the retracement of the rally following the Reserve Bank of New Zealand's hawkish meeting.
Eyes on the US dollar at this juncture
At this juncture, the US dollar needs to give back some ground for there to be a full-on and convincing accent in the commodity currencies. There's been no let-up to the DXY’s uptrend to date, with the price firmly grounded on the 99 handle with 2019's high at 99.67 as the next stop. The broad sweep of US data so far in 2020 has been reassuring and last year’s 75bp in Fed cuts has been insulating the US more than most.
However, Friday's data in the December industrial production that came in well below expectations, as well as disappointing details within the Retail Sales data, will potentially cap the dollar's advance for the immediate sessions in what is a US holiday. The Atlanta Fed lowered its GDPNow forecast of Q1 GDP growth from 2.73% to 2.35%. On the other hand, the sentiment behind the US elections with President Donald Trump as a clear front runner in the elections this year could continue to underpin the dollar's upside, potentially weighing on commodities.
It then boils down to the central banks. With the Federal Reserve seen to be on hold, the RBNZ's revised OCR forecasts should underpin the bird. The revised forecast shows the OCR remaining at 1.00% throughout 2020, and indicating a hike by Q4 2021.
The bird has broken the ascending tringle's resistance on the hourly time frame, having completed a 61.8% Fibonacci retracement of the recent range between the Feb. lows and post-RBNZ highs. Bulls will look for 0.6550 to hold as an important support structure before advances towards 0.6500/20/40 resistances.