NZD/USD can continue through the 61.8% extension level at 0.6870 and targets 0.6929

• NZD/USD has been chipping away at the upside as the dollar starts to get reigned in ahead of the Thanksgiving holidays that begin tomorrow in the US. The DXY is back of the recent highs through 97.50 and drifted to as low as 96.04 on Tuesday. The DXY was -0.01% entering today's US session; (Unchanged at the time of writing on mixed US data).
• NZD/USD has been able to find its wings again despite the broad-based deterioration in risk sentiment that kicked off the week and despite further weakness in global dairy prices - (With the GDT Price Index falling 3.5% on Tuesday). 
• NZD/USD is currently trading at 0.6845 with a high of 0.6854 and a low of 0.6781 -  The 161.8% extension level at 0.6870 is critical.

It's been two-way traffic for the bird since the 16th of this month, bids and offers coming in depending on risk sentiment and the mood around geopolitical scenarios, with a particular focus on the Sino-US trade-spat as we head closer towards the G20 summit on the 26th November. 

The latest on that is the souring of relations that were evident at the weekends APEC meeting; This weighed on the commodity complex and the antipodes. It appears that there is a risk of more U.S. tariffs on Chinese imports and that the U.S.-China trade rapprochement at the G20 meeting looks highly unlikely; This has weighed on global equities that were in a sea of red at the start of the week, sending the indexes into negative territory for 2018. 

However, there has been a slight correction on Wednesday with the Thanksgiving holidays approaching and some squaring off there, although we have had some chatter that the Fed may need to pause its tightening cycle in spring of 2019. However, that is likely more to do with global growth factors that could start to hinder the US growth momentum and be a potential reason to stay long the greenback. 

European politics in focus

Other than that, there is a keen focus on Brexit and Italian politics. Today, the EU made its first step toward imposing fines on Italy, but Italy’s markets have shrugged off the threat of penalties for breaking the budget rules on the hope that there might still be room for dialogue. This sent Italian bonds and bank stocks sharply higher as a buy the rumour sell the fact combined with the relief that there could be some spending revisions made by the Deputy Prime Minister Matteo Salvini in order to avoid punishment - leading to a rally in risk - which ultimately propped up the high betas such as the antipodes.  

US dollar and the US slowing down?

Meanwhile, US data has been mixed, but good to see some traction in the US housing market. We saw that the US Housing Starts came in line with expectations, although remaining within a trend that is still pointing towards moderation. However, today, Existing Home Sales MoM was a pleasant surprise to the upside at 1.4% vs 1.0% expected and far better than the -3.4% prior. However, this data does not detract one away from the evident slowdown in the housing sector, weighed upon by higher rates of interest for one - (30-year mortgage rates are close to 5.2% right now – the highest for eight years). "Wage growth is picking up, but at 3.1% it remains well behind annual house price growth of 5.5% year on year as of August," analysts at ING Bank pointed out. 

However, additionally, today we saw a terrible durable goods number which signals a slowdown in capex (business investment). Trump's ploy to encourage companies to bring back overseas profits through tax cuts has done little to encourage corporate investment. Today's data showed that October's orders were down -4.4% vs -2.5% expected and lower than the -0.1% prior that was actually revised from 0.8% - So even more bearish. 

Week Ahead

For the rest of the day/week, there is no doubt that liquidity will lighten up into Thanksgiving celebrations in the US. For now, the kiwi is likely to remain on the front foot so long as the long dollar position continues to be clipped on squaring up of positions into the holidays - There is little left in terms of economic data that has been slated for the week, but eyes will stay on oil prices, stocks and geopolitics.

NZD/USD levels

• Support 0.6700.
• Resistance 0.6890.

NZD has remained elevated since the strong employment report which had sent the bird onto the 0.68 handle and through the 38.2% retracement fibo (0.6810) of the 2018 sell-off from 0.7441 highs to 0.6427 2018 lows. There was a pull back before the run towards a 161.8% extension level at 0.6870 where bulls managed to score a high of 0.6884 which guards 0.6929, as the 50% fibo of the 2018 range - (weekly RSI still has room to go).