NZD/USD probes last Wednesday’s highs near 0.7180, as kiwi sits atop the G10 performance table

NZD/USD has continued to advance as the US session gets underway, recently scaling new heights for the day in the 0.7170s, up from Monday Asia Pacific session levels of just above 0.7100. The most immediate upside resistance is last Wednesday’s high at 0.7180, which the pair hasn’t quite been able to pip just yet on Monday. The New Zealand dollar is the best performing G10 currency on the day so far, up around 0.8% on the session versus the US dollar.

Market commentators are citing positive New Zealand reopening news as supportive for the kiwi; the government announced that the country’s largest city Auckland would have its Covid-19 alert level downgraded on Wednesday, allowing shops to reopen. Further reopening is expected at the end of the month. The country’s full vaccination rate is expected to hit 90% within a few weeks, a key threshold the government has said must be met in order for lockdowns to be eased.

The New Zealand economy has performed much better than expected so far in 2021, with the latest jobs data showing the unemployment rate dropping to 3.4% in Q3, well below any economist/RBNZ estimate of NAIRU (the “natural” rate of unemployment, below which inflationary pressures will build). Prompt reopening after recent lockdowns will ensure this year’s economic progress isn't scuppered. Indeed, following the recent strong jobs report, some analysts are calling for a 50bps hike at the next RBNZ meeting. “We see an increased chance of a 50bps hike at the November RBNZ meeting, given the following meeting won’t take place until February 2022” comments Citi.

Technical buying could also be helping NZD/USD on Monday; last Friday, the pair was probing its 21 and 200-day moving averages around the 0.7100 level. The fact this significant area of support has held might be interpreted as a bullish signal by some technicians, many of whom may be targetting a return to the October highs in the 0.7220 area.

Looking ahead, kiwi traders will be keeping an eye on October Electronic Card Retail Sales data, scheduled for release at 2145GMT. Otherwise, the pair is likely remain focused on Fed speak, with remarks from NY Fed President John Williams, FOMC member Michelle Bowman and FOMC member Charles Evans coming up over the next few hours. Remarks from Fed Vice Chair Clarida earlier in the session were broadly viewed as dovish and may have contributed to USD weakness/upside in NZD/USD.