New Zealand Dollar, NZD/USD, Economic Data, Event Risk, Technical Outlook – Talking Points
- New Zealand dollar rose slightly, but attitude to risk may be weak after weak AU PMI data
- Next week could be volatile, with highly impactful events in both the Asia Pacific region and the United States
- NZD/USD up slightly, but bears may attack December low at 0.6699 in bout of weakness
Asia Pacific forecast for Monday
The New Zealand dollar rose against the US dollar in early trade in the Asia-Pacific region, suggesting that the risk aversion seen last week may be easing. However, Weak PMI data from Australia this morning It shows that the Covid Omicron variable has a very real impact on demand within the Australian economy. This hit to demand was coupled with a drop in business confidence despite another round of lockdowns across much of Australia.
Later in the day, Japan is to release its own set of January PMI data from Gibbon Bank. The Japanese yen was weaker this morning against the other major currencies, as this morning’s tone appears risky despite the downbeat Australian PMI reading. Singapore is set to release inflation data for December, with analysts expecting the annual rate to exceed 3.75%, according to a Bloomberg survey.
This week will bring several events likely to have a significant cross-wire effect that could change the market sentiment. Australia’s fourth-quarter inflation is due on Tuesday with the headline figure expected to decline to 3.2% y/y. That could be up 3.0% year-over-year in the first quarter. New Zealand is next to speculate on inflation data, with fourth-quarter data seeing a 5.6% year-over-year drop on Wednesday. The New Zealand economy saw higher inflation against the Tasman cross pattern, which may be responsible for the stronger RBNZ response.
Outside the Asia Pacific region, the US is preparing to report the first Federal Open Market Committee (FOMC) interest rate decision of the year. The central bank is expected to stand on its benchmark rate, and in fact, President Powell may soften market expectations, which currently show roughly four 25 basis point hikes in prices for 2022. That could put pressure on the US dollar. The Fed’s preferred measure of inflation, the core PCE price index, will follow its rate decision later this week.
New Zealand Dollar / US Dollar Technical Outlook
The NZD/USD pair is up a bit this morning after a brutal 1.25% loss last week. The recent downward move has driven prices lower near the December low of 0.6699, which was the 2021 low. Bears may try to take advantage of any weakness and break below the level. This will likely open the door to further vulnerability. Instead, a move higher will target the 78.6% Fibonacci retracement level as potential resistance.
New Zealand dollar / US dollar daily chart
The graph was created using TradingView
— By Thomas Westwater, Analyst for DailyFX.com
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