NZD/USD stays below 21-day SMA despite Friday’s recovery gains

NZD/USD takes round to 0.6635 during Monday’s Asian session. The kiwi pair registered notable gains on Friday, mainly backed by the downbeat US jobs report, but seems to fail to extend the recovery gains off-late. The reason could be attributed to the lack of major data/events on the economic calendar and a mixed trade/political play.

Weaker than expected 164K figure of December month US NFP to 145K joined sluggish Average Hourly Earnings, to 2.9% from 3.1% forecast and prior. The outcome propelled the quote to extend bounces off the three-week low.

Also contributing to the pair’s upside was optimism surrounding the US-China phase-one deal. Chinese trade negotiation team led by Vice Premier Liu He will reach Washington on January 15. The US diplomats have so far been upbeat on that while recently signaling phase-two deal talks to take place then.

Even so, the pair remains capped below 21-day SMA amid political risks emanating from Iran. The Arab nation recently conducted another attack on the US military bases in Iraq while also arresting the UK’s ambassador to Tehran, which in turn raised Iran’s dislike among the global fraternity. On the domestic front, the nation struggles to regain its rulers’ popularity after they accepted that the mistakenly shot missiles that hit the Ukrainian plane were from Tehran. Elsewhere, the geopolitical tension amid the US-North Korea might recede as the latest news from Axios said the US reached North Korea for talks.

Risk tone seems to have recovered recently as neither the US nor Iran has the appetite for war while the US moving softer on China and North Korea also adds to the market’s risk-on. While portraying the same, the S&P 500 Futures gain 0.20% to 3,270 by the press time.

Markets are likely to remain directionless amid a silent economic calendar but trade/political news can keep traders busy. “A light domestic data calendar over the next week means the kiwi should take its cue from developments overseas. Key data will be the US CPI and retail sales for December. Both are expected to have firmed which should cap the upside for the NZD,” says the Australia and New Zealand Banking Group (ANZ).

Technical Analysis

21-day SMA level of 0.6652 holds the key to pair’s run-up towards 0.6680 and 0.6700 round-figure. Meanwhile, last week's low near 0.6600 offers immediate support to the quote ahead of December 18 low around 0.6550.