NZD/USD licks post RBNZ wounds above 0.6900 as US debt ceiling news brightens mood
|- NZD/USD stays on the way to consolidate the biggest daily loss in a week.
- Market sentiment improves as US Senate Republican Leader Mitch McConnell backs debt ceiling extension.
- US ADP Employment Change jumped to three-month high, RBNZ rate hike couldn’t get accolades.
- A light calendar, a shift in risk appetite may extend the corrective pullback, qualitative catalysts are the key.
NZD/USD keeps the latest rebound past 0.6900, sidelined around 0.6915 during the early Thursday morning in Asia, as risk-on mood helps buyers pare the previous losses.
The kiwi pair dropped the most in a week despite the Reserve Bank of New Zealand’s (RBNZ) rate hike on Wednesday before the shift in sentiment triggered the corrective pullback from the weekly lows.
The recent shift in the sentiment could be linked to the updates on the US debt ceiling extension as reports suggest that the Senate Republican Leader Mitch McConnell is in favor of a short-term stretch, till December, to the debt limit. The Republicans were previously rejecting the much-awaited action even as US Treasury Secretary Janet Yellen warned of empty pockets by October 18 if the debt filibuster couldn’t be agreed by then. It should be noted, however, that the White House awaits a formal offer by Republicans to assent move, which in turn can offer another push to the market optimism.
Elsewhere, US Secretary of State Antony Blinken criticized China’s approach for Taiwan while also urging the dragon nation for acting responsibly over Evergrande’s financial crisis, signaled Bloomberg. It should be noted that the Sino-American tussles are likely easing of late as US President Joe Biden and his Chinese counterpart Xi Jinping previously respected the Taiwan agreement and chatters are also loud that they meet, virtually, by the year-end. This in turn adds to the risk-on mood.
Alternatively, a three-month high US ADP Employment Change, 568K versus 340K prior, joins the RBNZ’s cautious optimism, as revealed through the statement to challenge the NZD/USD upside. Furthermore, New Zealand’s steady increase in virus cases and the recent gas crisis in Europe add to the market's hardships and underpin the US dollar’s safe-haven demand.
That said, the US 10-year Treasury yields closed near 1.53%, down 0.2 basis points (bps) after refreshing the highest levels since June 17 whereas the Wall Street benchmarks printed mild gains by the end of Wednesday’s North American session.
Moving on, a light calendar at home and abroad will keep NZD/USD traders directed towards the risk catalysts for fresh impulse. Hence, headlines relating to the US stimulus and debt ceiling, as well as concerning China, will be important to follow.
Technical analysis
Tuesday’s Doji, followed by Wednesday’s long bearish candlestick keeps NZD/USD sellers hopeful. However, a convergence of an ascending support line from August 20 and July’s low, near 0.6880, becomes a tough nut to crack for the bears. On the contrary, 10-DMA around 0.6965 guards the immediate upside ahead of a three-week-old descending trend line and 38.2% Fibonacci retracement May-August fall, surrounding the 0.7000 threshold.
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