- NZD/USD has dropped back sharply in recent trade, falling under 0.6800 as the dollar broadly picked up.
- The main drivers this week will be the key US December jobs report, as well as the December ISM surveys.
NZD/USD has stabilised in recent trade after pulling back sharply from Asia Pacific/early European session highs in the 0.6840 area to current levels in the 0.6780s. The 21-day moving average at 0.6786 seems to be offering some support where last week’s lows at 0.6790 failed. FX markets have been choppy and difficult to make sense of on Monday, with the dollar and yen seemingly gaining ground amid a safe-haven bid, but typically more risk-off resilient currencies like CHF and EUR suffering alongside the more risk-sensitive currencies like NZD, AUD and CAD.
Liquidity conditions remain thin/somewhat impaired amid the absence of many Asia Pacific and European market participants. Markets in the UK, Australia, New Zealand, Canada, Japan and China were all closed on Monday. A break below support around current levels for NZD/USD would likely signal continued drop back towards December lows around 0.6700. NZD/USD’s failure to break above trendline resistance last week in the mid-0.6800s seems to have been taken as a bearish signal. The main drivers of the pair and FX markets more broadly this week will be the key US December jobs report, as well as the December ISM surveys.
At current levels, NZD/USD’s Z-score to 200DMA is roughly -1.8, meaning it trades about 1.8 standard deviations below its 200DMA. As recently as mid-December, the pair’s Z-score was closer to -3.0. Looking back at the last five or so year, apart from during times when FX markets were undergoing violent repricing (such as during the March 2020 Covid-19 panic), a Z-score near or below -2.0 has been an indicator that conditions have become oversold and, at the very least, some consolidation lays ahead.
And consolidation has been just what NZD/USD has seen over the past few weeks. Whether this can continue into early 2022 is another question as the Fed primes itself for a potential rate hike as soon as March. NZD/USD’s Relative Strength Index score of close to 43 suggests there is plenty of room for some further selling pressure. But the RBNZ is ahead of the Fed when it comes to policy normalisation and looks set to extend its lead, a fact that seems to have e been neglected by FX markets as of late. Perhaps the NZD isn’t as vulnerable to the dollar’s advances as say the euro, yen and Swiss franc, central banks are decisively more dovish.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD stays near 1.0800 after upbeat US data
EUR/USD stays under modest bearish pressure and trades near 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.