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Currency Swings in Thin Markets to Struggle for Follow-Through

Currency Swings in Thin Markets to Struggle for Follow-Through

Talking Points:

  • Currency Swings in Thin Holiday Trade Likely to Struggle for Follow-Through
  • New Zealand Dollar Outperforms After Yields Rise, Demand Firms at Bond Sale
  • Australian Dollar Falls After Capex Unexpectedly Drops Most on Record in 3Q

The European data docket offers a lackluster set of low-tier releases and US markets are closed for the Thanksgiving holiday. This could make for a period of directionless drift across the G10 FX space. However, illiquid trading conditions may amplify knee-jerk volatility in the event that an unexpected event risk spooks the markets. Seemingly potent moves generated under these circumstances may struggle for follow-through and unravel once market participation fills out anew.

The New Zealand Dollar outperformed in otherwise quiet overnight trade following an auction of 2020 government bonds. The average yield rose to 2.87 percent from 2.73 percent at last month’s sale of analogous paper even as demand strengthened, with the bid-to-cover ratio rising to 2.87 from 2.64. That hinted at improving monetary policy expectations and a swell in investors’ appetite for NZD-denominated assets.

The Australian Dollar spiked lower after an ABS report showed that private capex spending unexpectedly fell 9.2 percent in the third quarter, marking the largest decline since records began in 1987. The currency tracked front-end bond yields downward, suggesting the soft result fueled RBA rate cut speculation. The move lost momentum relatively quickly however as prices reverted to quiet consolidation amid pre-holiday thinning of liquidity.

Losing Money Trading Forex? This Might Be Why.

Asia Session

21:45NZDTrade Balance (NZ$) (OCT)-963M-1000M-1140M
21:45NZDTrade Balance 12mo YTD (NZ$) (OCT)-3237M-3318M-3165M
21:45NZDExports (NZ$) (OCT)3.83B4.0B3.68B
21:45NZDImports (NZ$) (OCT)4.79B4.97B4.82B
00:30AUDPrivate Capital Expenditure (3Q)-9.2%-2.9%-4.4%

European Session

08:15CHFIndustrial Output (YoY) (3Q)--2.5%Low
08:15CHFIndustry & Construction Output (YoY) (3Q)--2.5%Low
09:00EUREurozone M3 Money Supply (YoY) (OCT)4.9%4.9%Low
12:00EURGerman GfK Consumer Confidence (DEC)9.29.4Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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