NZD/USD refreshes multi-month top after Fed’s dovish pause, phase-one doubts prevail
|- NZD/USD seesaws around the highest since July-end.
- FOMC members expect no rate change in 2020, Chairman Powell sounds worried for Inflation.
- US-China far from phase-one despite nearness to US tariff deadline.
NZD/USD trades around 0.6590, close to the July 31 top, at the start of Thursday’s Asian session. The kiwi pair previously benefited from the New Zealand government’s spending while benefited from the US Federal Reserve’s (Fed) dovish appearance off-late.
The Fed held its monetary policy unchanged while waving bye to 2019. Though, 13 of 17 from the Federal Open Market Committee (FOMC) expect no rate change in 2020 whereas Chairman Jerome Powell signaled further adjustments to the currently easy monetary policy will be based on the inflation.
Markets reacted to this with a broad US dollar (USD) selling while also dragging the US 10-year treasury yields to the weekly low.
On the trade front, neither China nor the United States (US) provided any strong clues for the phase-one even though its only two days before the US tariffs on Beijing goods will be active. In its latest communication China, as conveyed by the CNBC, China wants the removal of the upcoming tariffs as a pre-condition to stay on the negotiation table.
Previously, the quote kept the gains as the New Zealand (NZ) government announced the New Zealand dollar (NZD) 12 billion of infrastructure spending. Also increasing the pair’s strength was the absence of any positive surprise from the US Consumer Price Index (CPI) and Core CPI data.
Traders will now focus on the second-tier NZ data, like Food Price Index, Visitor Arrivals and ANZ Monthly Inflation Gauge, for intermediate moves but the overall sentiment will be guided by US-China trade news.
Technical Analysis
Prices need to sustain beyond 0.6600 mark to escalate recent run-up towards early-June top surrounding 0.6685. Alternatively, a downside break below 200-day Exponential Moving Average (EMA) level of 0.6521 can recall November month's top of 0.6466.
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