New Zealand Dollar, U.S. Stimulus, NZD/USD, AUD/NZD – Talking Points
- U.S. trading sees risk-on tilt following progress in U.S. stimulus talks on Capitol Hill
- Asia-Pacific trade may follow, but traders cautious on Covid, China-Australia relations
- New Zealand Dollar moderates following pullback from new multi-year high
The S&P 500, Nasdaq 100, and Russell 2000 indexes pushed into fresh record-high territory as traders keyed in on improving stimulus discourse between lawmakers on Capitol Hill Tuesday. The need for a fiscal deal in the U.S. has reached a high point amid rising Covid infections across the country, forcing several states to lockdown in an effort to control virus spread and give relief to hospitals, many of which are at or near ICU capacity.
S&P 500, Nasdaq 100, Russell 2000 30-Min Chart
Chart created with TradingView
Along with improved U.S. stimulus prospects, Pfizer’s Covid-19 vaccine received good news on a report from the FDA that indicates the drug may now be only days away from receiving an emergency use authorization. If so, high-priority groups of Americans could receive the first dose of vaccination as early as next week. However, widespread distribution continues to pose a problem for policymakers ahead of the winter. More lockdowns may hit sentiment in the coming weeks as Covid hospitalizations hit a record-high in the US to start the week at 102,148.
US Covid Statistics
Source: The Covid Tracking Project
Wednesday’s Asia-Pacific Outlook
Asia-Pacific markets may continue the slight risk-on tilt seen in the New York trading session, but traders remain cautious as talks between the European Union and the U.K. continue without an agreement. South Korea is also continuing to battle a rise in Covid cases, with President Moon Jae-in ramping up efforts to control the spread of the virus.
China-Australia relations remain frail after Beijing continues to pressure Australia with tariffs on wine and other goods. The breakdown in relations has been an afterthought to markets overall, but further aggression between the two economies may start to creep into sentiment. Still, iron ore prices remain near seven-year highs as China imports massive amounts to fuel stimulus-driven construction and infrastructure projects.
Meanwhile, New Zealand Dollar strength has given way to relatively subdued trading action. NZD/USD reached new multi-year highs earlier this month following an impressive rally in the Kiwi. If current indecision turns into near-term bearishness, early 2019 highs - directly below the 0.70 handle - may offer new support. Momentum appears well-positioned with its MACD line accelerating relative to the signal line.
NZD/USD Weekly Chart
Chart created with TradingView
AUD/NZD is trading lower after the recently formed Death Cross in the pair – see chart below. The New Zealand Dollar may strengthen against the Australian Dollar further following the bearish omen. Moreover, the overall path lower appears likely given its recent stride of lower lows and lower highs since the 2020 swing high.
AUD/NZD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
