NZD/USD drops back towards 0.7150 as risk appetite deteriorates post-Powell presser


  • NZD/USD is dropping back towards lows of the day under 0.7150.
  • A broad deterioration in risk appetite is being witnessed as stocks sell-off overvaluation concerns.
  • The Fed event was closely watched but did not impact markets much.

NZD/USD has dropped back towards lows of the day in recent trade in tandem with continued pressure in US equity markets. In the immediate reaction to the release of the Fed’s monetary policy statement, the pair nearly manage to rally back above the 0.7200 level, but has since slid back into the 0.7150s and is eyeing a test of daily lows in the 0.7140s. At present, kiwi is trading lower by about 1.0% on the day versus the US dollar. The deterioration in risk appetite that has weighed on NZD on Wednesday started before the Fed event and has continued after, and has been the main driver of kiwi price action.

Kiwi turns lower again

The recent downturn in risk appetite that has pushed NZD/USD back towards 0.7150 coincided with Fed Chair Jerome Powell’s press conference, but was not as a result of anything he said or didn’t say. Indeed, he did not really say anything new on the Fed’s new Average Inflation Targeting policy, he reiterated that it is too early for the Fed to be talking about tapering its asset purchase programme, he played down the idea that the stock market was a bubble (as you would expect him to) and noted that the path of the pandemic (the spread of the virus and mass vaccination efforts) are key to the outlook (also as you would expect him too).

Though Powell played down the prospect of the stock market being in a bubble, his comments will not have eased the growing concerns of investors over the last few days. Market commentators have attributed Wednesday’s pullback from all-time high levels in the major US indices (and subsequent deterioration in risk appetite that has weighed on NZD) to “over-valuation fears”, as investors observe the circus currently in play as retail investors pump and dump all manner of small-cap stocks (just look at GameStop!).

NZD was largely unresponsive to underwhelming trade data; the country's trade surplus dropped to just NZ$ 17M in December, down from NZ$ 250M the month before and well below expectations for a drop to NZ$ 80M. The drop in the trade surplus was driven by a smaller than expected rise in exports to a total of NZ$ 5.35B on the month, up from NZ$ 5.2B the month before, and a surprise increase in imports to NZ$ 5.33B from NZ$ 4.95B the month before. 

Fed monetary policy decision & statement recap

As expected, the FOMC held rates at 0.0-0.25% and reiterated that this is where rates would stay until inflation runs moderately above 2% for some time, so that inflation averages 2% over time and longer-term inflation expectations remain well-anchored at 2%. Meanwhile, the Fed maintained the pace of their monthly asset purchases at $80B in treasuries and $40B in mortgage-backed securities and reiterated that purchases would continue at this pace until “substantial further progress” had been made towards the bank’s maximum employment and price stability goals. The Fed repeated that it remains committed to using its full range of tools to support the economy and that it remains prepared to adjust its policy settings as appropriate if risks emerge that could impede the attainment of its employment and price stability goals. The vote in favour of holding its policy-setting steady was unanimous.

On the economy, the Fed repeated that the pace of economic activity and employment had moderated in recent months, but, seemingly in acknowledgment of the recently observed weakening in economic momentum at the end of Q4 2020/early January 2021, said that noted that weakness is mostly concentrated in sectors most adversely impacted by the pandemic. The path forwards for the economy will depend significantly on the pandemic, including progress on vaccinations, said the bank. The public health crisis continues to weigh on economic activity, the bank added and still poses considerable risks to the outlook. Finally, on inflation, the Fed noted that weaker demand and earlier declines in oil prices was still holding down consumer inflation.

NZD/USD

Overview
Today last price 0.7156
Today Daily Change -0.0086
Today Daily Change % -1.19
Today daily open 0.7242
 
Trends
Daily SMA20 0.7173
Daily SMA50 0.71
Daily SMA100 0.6889
Daily SMA200 0.6657
 
Levels
Previous Daily High 0.7248
Previous Daily Low 0.7167
Previous Weekly High 0.7226
Previous Weekly Low 0.7096
Previous Monthly High 0.7241
Previous Monthly Low 0.7002
Daily Fibonacci 38.2% 0.7217
Daily Fibonacci 61.8% 0.7198
Daily Pivot Point S1 0.719
Daily Pivot Point S2 0.7138
Daily Pivot Point S3 0.7109
Daily Pivot Point R1 0.7271
Daily Pivot Point R2 0.73
Daily Pivot Point R3 0.7352

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD hits six-week high amid risk-on mood

EUR/USD has risen above 1.22, hitting the highest since mid-January. The US Fed's commitment to easing has boosted the market mood and the safe-haven dollar is down despite higher US yields. A big bulk of US data including GDP awaits traders.

EUR/USD News

AUD/USD breaks through critical 0.8000 level, fresh three-year highs

AUD/USD rides the reflation wave higher. The aussie reaches the highest since February 2018. Surge in commodities complex underpins the AUD.

AUD/USD News

Gamestop (GME) Stock Price and Forecast: Soars 273% as “diamond hands” trigger meme stock comeback

NYSE: GME is trading at around $168 in Thursday's premarket trade, up 273% from Wednesday's early trading price. The departure of the CFO served as the trigger to the fresh buying frenzy. Retail traders that have held onto shares seem to be behind the surge.

Read more

Dogecoin on the verge of a 75% lift-off

Dogecoin price has been lull ever since the local top on February 7. However, a 20% surge due to Elon Musk’s recent endorsement has led to a breakout from a bull flag pattern. Now, the meme coin could surge 75% to record levels soon.

Read more

US Dollar Index looks depressed near 90.00 ahead of data

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, remains under heavy pressure around the key 90.00 neighbourhood in the second half of the week.

US Dollar Index News

Forex MAJORS

Cryptocurrencies

Signatures