NZD/USD in a sideways drift on 0.67 handle awaiting volume and a fresh catalyst
|- NZD/USD rests after a day of volatility overnight.
- NZD/USD technicals lean bearish.
NZD/USD has drifted sideways in a quiet Asian session in the holiday season as traders drift in back to their desks ahead of the weekend and New Year celebrations around the corner.
NZD/USD is currently trading at 0.6729, off the highs of 0.6746 having recovered from the 0.6716 overnight session lows.
The greenback was on a tear overnight which weighed heavily on the bird initially before risk bounced sending stocks higher and supporting the high betas, commodities.
Politics in the driving seat
There is nothing from the domestic calendar and focus will remain with state of affairs in the US government which partially closed its doors due to a funding dispute as well as the global economic outlook. Trump has said Tuesday that the government won’t reopen until “we have a wall, fence, whatever they like to call it.”
Analysts at TD Securities offered pointers on the US government shutdown:
- "The government remained shut down for the fifth day. Even though the Senate will be in session tomorrow, we don't think that Congress is close to a deal yet. The new session of Congress begins on January 3, and we expect a deal to be reached thereafter, though a Trump veto threat without the wall is a real possibility. We could see the shutdown lasting into mid-January.
- During a shutdown, some economic data releases are delayed. Based on the experience of the 2013 shutdown, the December payroll report will not be released on Jan 4th if the government shutdown persists after this week.
- Historically, shutdowns have not had much of an economic or market impact. However, it reinforces the extent of dysfunction in Congress and essentially removes any chance of bipartisan fiscal stimulus such as infrastructure. It can also worsen the risk-off sentiment in the market."
NZD/USD levels
NZD/USD dropped back below the 38.2% Fibo and now eyes a test of S3 down at 0.6714. The prospects for a flight towards the 61.8% Fibo at 0.7048 have flipped to the 23.6% fibo as a more likely scenario instead. RSI and various indicators are leaning with a bearish bias, supporting the bearish outlook for forthcoming price action.
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