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New Zealand Dollar May Rise Against USD, British Pound Weakened

New Zealand Dollar May Rise Against USD, British Pound Weakened

Daniel Dubrovsky, Strategist

Asia Pacific Market Open Talking Points

  • New Zealand Dollar outperformed, but still little changed from Friday
  • Risk trends waxed and waned on US and Europe Markit PMI outcomes
  • NZD/USD may look bullish technically ahead of Wednesday’s RBNZ

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New Zealand Dollar Gains as British Pound Falls

The pro-risk New Zealand Dollar outperformed against its major counterparts on Monday, but that still left it shy of overturning its losses against the US Dollar from Friday. Its upside movement tracked a cautious improvement in risk appetite in the aftermath of Monday’s lackluster Asia Pacific trading session. There, a deterioration in US-China trade deal optimism initially boosted the anti-risk Japanese Yen.

Most of the gains in equities on Monday stemmed from the US trading session, though that only left the S&P 500 little changed from Friday’s close after a downside gap. During this time, rosy US Markit Manufacturing PMI data contrasted with starkly worse-than-expected outcomes in analogous measurements from Europe. This was particularly so with the economic powerhouse of the EU – Germany.

This mixed performance in equities by the end of Monday extended into currencies where JPY pared prior gains. Meanwhile, the British Pound underperformed as EU’s Chief Negotiator Michel Barnier poured cold water on Brexit deal hopes. He mentioned that it is “difficult to see” how a withdrawal deal with the UK could be reached ahead of the October 31 deadline.

Tuesday’s Asia Pacific Trading Session

S&P 500 futures are pointing cautiously higher heading into Tuesday’s Asia Pacific trading session. A lack of critical economic event risk during this time places the focus on risk trends for foreign exchange markets. As such, the JPY could be vulnerable should regional bourses trade to the upside. Meanwhile, this may bode well for the sentiment-linked NZD.

New Zealand Dollar Technical Analysis

On a daily chart, NZD/USD’s downtrend has idled just above the 2015 lows which act as a key psychological barrier between 0.6197 and 0.6245. Positive RSI divergence does indicate fading downside momentum which can at times precede a reversal or translate into consolidation.

NZD/USD Daily Chart

New Zealand Dollar May Rise Against USD, British Pound Weakened

Zooming in even further to the 4-hour chart, we can see that NZD/USD cleared a near-term descending trend line from earlier this month. A couple of confirmatory upside closes have already been established. Fundamentally, keep in mind that the RBNZ rate decision is due on Wednesday, clouding the outlook.

Join DailyFX Analyst Dimitri Zabelin for live coverage of this week’s RBNZ rate decision and reaction in NZD/USD

NZD/USD 4-Hour Chart

New Zealand Dollar May Rise Against USD, British Pound Weakened

Charts Created Using TradingView

FX Trading Resources

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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