NZDUSD Rally Continues
As we wrap up another week I’ve been doing the usual rounds, chatting with traders about their winners and losers and, always more interestingly, the ones that got away. In terms of the big moves that traders are kicking themselves over this week, in the FX space anyway, it’s the ongoing rally in NZDUSD that has been capturing the most attention. While bears have been patiently waiting for the rally to reverse, NZD kept on trucking and clocked a more than 2% rally this week, extending the gains of the prior week. So, as ever, if you caught this move – well done! And if not? There’s always next week. Let’s take a look at what caused this move and why it was a great trade.
What Caused the Move?
USD Weakness
The main driver behind the rally in NZDUSD this week has been the sell off in USD. With the greenback cratering on the back of Powell’s lacklustre comments at Jackson Hole, higher yielding currencies like NZD and AUD have been the main beneficiaries. The market was looking for Powell to offer up a clear tapering signal over the coming months. However, with the Fed chairman refraining from doing so, citing the ongoing uncertainty in the outlook, traders were seen quickly unwinding USD upside bets.
Across the week, a series of weaker-than-expected data points has seen the greenback falling further lower as the ADP release and the employment component of the manufacturing PMI both raised fears of a weaker-than-expected NFP result later today. While that remains to be seen, for now, the Dollar is continuing to head lower, allowing for risk assets, risk currencies such as NZD to continue higher in the near term.
Hawkish RBNZ Expectations
Added to the mix is the fact that the RBNZ is among the most hawkish of the G10 central banks. With the RBNZ having announced an end to QE as of this month and given a clear sign that it intends to hike rates as soon as possible, NZD holds a lot of upside prospects which should keep NZDUSD supported over the coming weeks, provided there are no upside USD fireworks on the back of today’s data. So that’s the fundamental backdrop, let’s now take a look at the technical picture.
Technical Views
NZDUSD
The rebound off the .6791 level has seen price breaking through several key resistance areas; the .6933 mark, the local bearish trend line and now the .7110 level. Price is now testing the bear channel top and with indicators turned firmly bullish, the focus is on a breakout and continuation towards the .7315 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.