NZD/USD clings to 21-day SMA as US-China trade uncertainty prevails

  • NZD/USD looks for direction after consecutive three days of declines.
  • Doubts surrounding US-China “Phase One” deal keep the risk-tone heavy.
  • The absence of local data highlights Aussie statistics, trade news for fresh impulse.

Amid a lack of clarity over when, where and how the much-awaited trade deal between the United States (US) and China will be signed, the NZD/USD pair begins Thursday’s Asian session around 0.6370.

The kiwi pair registered third back-to-back negative daily closing by the end of Tuesday’s US session and the major reason to blame was trade uncertainty. Also adding to the pair’s weakness was weaker than expected third quarter (Q3) employment numbers from New Zealand.

While initial speculations that China’s push for more tariff reversal from the US keeps a check of odds favoring the “Phase One” deal tamed the risk-tone on early Wednesday, the sentiment got worsened after Reuters reported that the deal could not be signed before December. Though, the piece turned down Chinese demand for tariff roll back as the catalyst.

Following the same, Fox Business News came out with upbeat news that a Chinese trade source told them the US will not implement the scheduled increase in tariffs on December 15. It was also mentioned that the US diplomats were looking for China’ President Xi Jinping’s travel schedule for possible signing of a deal in December.

Hence, mixed signals from the trade source keep Antipodeans on the edge amid an increase in risk-aversion, which saw a decline in the US 10-year treasury and the bund yields.

On the other hand, New Zealand’s latest employment statistics, even if being downbeat, fail to generate much of the pessimism surrounding next week’s monetary policy meeting by the Reserve Bank of New Zealand (RBNZ). The Australia and New Zealand Banking Group (ANZ) holds its November rate cut forecast intact while saying, “The NZ unemployment rate rose back to 4.2% in the third quarter of the year. This was in line with ANZ expectations, but slightly higher than the market expected. The 4.2% print reflected a bounce-back from 3.9%, which was the lowest unemployment rate in 11 years, and takes us back to where we were at the start of the year. The details of the release were mixed – employment rose a soft 0.2% in the quarter. But wages were robust and a broader measure of labor market tightness did strengthen; the underutilization rate ticked down to 10.4% from 11.0% last quarter. While an unemployment rate of 4.2% still indicates a ‘tight’ labor market, it’s lagging properties as an economic indicator suggests that the domestic economy is unlikely to see a sharp rebound in the near term. Overall, it reinforces our expectations for a 25bp cut to the OCR at next week’s MPS.”

Given the lack of catalysts on the local economic calendar, kiwi traders will look for near-term directions from Australia’s September month trade numbers and the US-China headlines. It should also be noted that the weekly Initial Jobless Claims and Fedspeak could keep entertaining traders during the US session.

Technical Analysis

The seesaws around a 21-day Simple Moving Average (SMA) level of 0.6365, which triggered its bounce during late-October, a break of which could recall 0.6330 and 0.6300 on the chart. Should prices repeat the previous pullback from near-term SMA, 0.6425 can entertain buyers ahead of 100-day SMA level of 0.6460.

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