NZD/USD is having trouble breaking a technical support level ahead of the U.S. PPI and FOMC meeting minutes releases.
Can the comdoll extend its trend despite a risk-averse trading environment?
Before moving on, ICYMI, we’ve written a U.S. CPI Report Event Guide for ya. Be sure to check out if you can make a good trading play out of the potential scenarios!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
FOMC member Christopher Waller: The Fed will “stay on the job” to achieve price stability
FOMC member Neel Kashkari thinks it’s “possible that higher long-term yields may do some of the work” for the Fed but is not sure that “because they [yields] moved, we don’t have to move.”
New Zealand’s visitor arrivals decreased by 4.1% m/m in August after a 1.8% uptick in July
China mulls new stimulus, higher deficit to meet growth goal – Bloomberg News
RBA Assistant Governor Chris Kent says the central bank is in its “third phase” of monetary policy tightening where there’s “an opportunity to see how the economy and how the data is evolving”
Japan’s preliminary machine tool orders declined by another 11.2% y/y in September after a 17.6% drop in August; domestic demand declined at a faster rate
Germany’s final CPI confirmed a 0.3% monthly inflation uptick (+4.5% y/y) for the month of September
Price Action News
Asian session traders started their day by taking cues from Wall Street’s positive close and the prospect of a less hawkish Fed. It also didn’t hurt that speculations of additional Chinese stimulus gained traction again.
The party didn’t last, however, thanks to concerns that the geopolitical tensions in the Middle East would spread to the larger European region. Safe havens like gold popped higher while U.S. and European bonds also found momentum.
The “risky” New Zealand dollar, in particular, made new weekly highs before quickly heading towards yesterday’s lows against its major counterparts.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. PPI reports at 12:30 pm GMT
FOMC member Waller to give a speech at 2:15 pm GMT
FOMC meeting minutes at 6:00 pm GMT
U.K. RICS house price balance at 11:01 pm GMT
Japan’s core machinery orders at 11:50 pm GMT
Japan’s PPI reports at 11:50 pm GMT
Japan’s bank lending at 11:50 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
As mentioned above, the New Zealand dollar lost its intraday gains as European session traders worried about a possible escalation of the geopolitical tensions in the Middle East.
However, NZD/USD seems to have found support from the .6025 level above the 15-minute chart’s 200 SMA. As you can see, the area is also near the ascending channel support and the S1 (.6010) of today’s Pivot Points.
Can NZD/USD still extend its trend? Uncle Sam will be printing its PPI and FOMC meeting minutes reports later today. Word around is that the reports will support the Fed penciling in at least one more rate hike sometime this year.
Based on the recent FOMC member speeches, though, it’s possible that the members may be more chill about the next rate hike than the markets thought. The decline of the U.S. 10-year bond yields is also supporting the “less hawkish Fed” speculations.
So, unless we see uber-hawkish U.S. reports today, U.S. session traders may extend their risk-taking and NZD/USD may attract some demand from its current levels.
NZD/USD could revisit its weekly highs near .6050 before it sees sustained selling pressure.
But if the risk-averse tone from the early European session extends to U.S. session trading, then NZD/USD may just break its channel support.
Watch this pair closely, forex friends!