NZD/USD: Bulls and bears jostle above 0.6700 ahead of the key day
|- NZD/USD retraces gains from an eight-day high within a 20-pip trading range above 0.6808.
- New Zealand’s fortnightly GDT Price Index, Q2 Current Account beat forecasts.
- Market sentiment stays mildly positive amid mixed catalysts, pre-Fed caution.
- NZ Treasury’s PREFU, risk-related updates will offer intermediate clues.
NZD/USD takes rounds to 0.6710/15 amid the pre-Tokyo open Asian trading on Wednesday. In doing so, the kiwi pair pays a little heed to New Zealand’s second-quarter (Q2) Current Account details while waiting for the Pre-election Economic and Fiscal Update (PREFU) from Treasury. Also restricting the pair’s moves could be the pre-Fed cautious sentiment and light news feed.
Traders ignore second-tier data…
Be it Australia’s downbeat House Price Index or New Zealand’s (NZ) Current Account details that beat forecasts, market players showed a little reaction to the economics. New Zealand’s Current Account balance grew past-$0.595B forecast and $-1.557 prior to $1.828B whereas the Current Account to GDP ratio recovered from -2.5% market consensus to -1.9% in the second quarter of 2020.
The reason for the lack of market reaction can be traced from the generally followed tight trading patterns ahead of the key data/events and/or mixed catalysts concerning the risk events. Among the central bankers, the upcoming Federal Open Market Committee (FOMC) meeting, up for announcement at 18:00 GMT, gains the major market attention ahead of the next week’s monetary policy meeting by the Reserve Bank of New Zealand (RBNZ).
It should also be noted that the NZ Treasury’s update on the national economics, including the forecast of Q2 GDP and state of government finances, scheduled for publishing at 01:00 GMT, can offer immediate direction to the pair and hence make the quote additionally nervous. Ahead of the event, the Australia and New Zealand Banking Group (ANZ) said, “Do not expect any new policy announcements, as the PREFU is a Treasury document designed to inform the voter about the state of the books ahead of the election and ensure no surprises for the incoming Government.” However, the update from the government becomes the key for the pair traders to watch.
Also acting as the trade barriers are non-uniform risk signals. Although the latest verdict from the World Trade Organization (WTO), against the US sanctions on China, question the risk-on mood, the previously scaled back anti-trade measures by Washington and Beijing favor the market optimism. It should also be noted that the news concerning the coronavirus (COVID-19) vaccine from the University of Pittsburgh School Of Medicine also adds to the market confusion.
Amid all these plays, S&P 500 Futures drop 0.08% after Wall Street barely managed to ignore the negative closing.
Looking forward, updates from NZ Treasury will be the key but major attention will be given to the US FOMC announcements where the economic forecasts become crucial to watch.
Read: September FOMC Preview: Projections, projections, projections
Technical analysis
Unless declining back below an ascending trend line from August 20, at 0.6637 now, buyers may keep struggling to refresh the monthly high of 0.6790 with the 0.6800 threshold.
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