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NZD/USD opened with a strong bullish gap on trade headlines and Trump's, "Dollar is too strong," comments

  • The Wall Street Journal's news is doing the rounds in early trade at the start of this week, giving the antipodes a lift. 
  • President Donald Trump said Saturday that the U.S. dollar is too strong and took a swipe at Federal Reserve Chairman Jerome Powell as someone who “likes raising interest rates.”
  • NZD/USD has opened with a positive thrust and marked a bullish gap on the charts.
  • However, technically there is no follow through, restricted at the resistance of the base of the hourly cloud in illiquid early Asian markets. 

Trump has talked down the dollar over the weekend.

“I want a strong dollar but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” Trump said on Saturday.

Then, the WSJ reported today that China and the U.S. are in the final stage of completing a trade deal, "with Beijing offering to lower tariffs and other restrictions on the American farm, chemical, auto and other products and Washington considering removing most, if not all, sanctions levied against Chinese products since last year.

The agreement is taking shape following February’s talks in Washington, people briefed on the matter on both sides said. They cautioned that hurdles remain, and each side faces possible resistance at home that the terms are too favourable..." the article wrote. 

Elsewhere, the stronger than expected China Feb manufacturing survey (Caixin) was a boost to risk sentiment, lifting global stock prices, although still in contraction territory so the optimism was shortlived on the FX screens. The Kiwi slipped from a touch below the 0.6840 level and bled out to a low of 0.6793, closing a handful of pips above there for the week. 

Looking ahead, U.S. nonfarm payrolls and Chinese trade data will be key.

Nonfarm Payrolls

"Following two consecutive reports with initial 300k+ prints, we look for payrolls to mean-revert to 190k in February. We also expect the phase-out of the impact from the government shutdown to be reflected on a tick down in the unemployment rate to 3.9%. Lastly, we forecast wages to rise by a “soft” 0.3% m/m pace (3.3% y/y) in February aided by a favourable reference week,"

the analysts at TD Securities, (TDS), wrote.

China trade data

As for Chinese trade data, the analysts at TDS argued that;

"February trade data is particularly hard to forecast given distortions from Chinese New Year. Our model predicts significantly worse outcomes than consensus for both exports (-15.5% y/y) and imports (-13.4% y/y) based on trading partner activity. For example, Korean exports to China dropped 12% m/m in Feb. Surveys including manufacturing PMIs also point to ongoing declines."

NZD/USD levels

The bird is moving out of oversold territory with stochastics maxed out pointing to a pause in the downside and a possible correction from trend line support in the region of 0.6800. An upside target at the trend line resistance, slightly below the double top highs comes in at around 0.6890. A break beyond there opens 0.6929. A continuation of the downside opens the 100-D SMA - (0.6767).

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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