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New Zealand Dollar May Extend Gains as Risk Appetite Recovers

New Zealand Dollar May Extend Gains as Risk Appetite Recovers

Talking Points:

Gauge Trends and Spot Reversals in the Major Currencies with DailyFX SSI

The New Zealand Dollar outperformed at the start of the trading week as front-end bond yields tracked higher, pointing to ebbing RBNZ interest rate cut expectations. The Japanese Yen corrected lower having soared after the BOJ monetary policy announcement late last week. Meanwhile, the Canadian Dollar edged upward in a move retracing losses after Friday’s selloff in the wake of soft CPI figures.

The Euro gapped down at the weekly trading open after Spain’s Prime Minister Mariano Rajoy and his PP party lost parliamentary majority at a general election held over the weekend. This opens the door for coalition negotiations that may bring the eurosceptic, anti-austerity Podemos party into government as part of a broader left-leaning coalition led by the PSOE, the PP’s top rival.

Podemos is seen as analogous to Greece’s Syriza, whose firm opposition to EU/IMF-mandated austerity measures spooked investors with the possibility of a heretofore unprecedented exit of a Euro member state out of the currency bloc. A similar narrative playing out in the Eurozone’s fourth-largest economy could prove deeply destabilizing for regional and global markets. The single currency’s response has been relatively muted thus far however as traders await greater clarity.

Looking ahead, a lackluster round-up of scheduled event risk is likely to see sentiment trends taking center stage. S&P 500 futures are pointing higher, hinting that a recovery in risk appetite may be in the cards after the blood-letting in the aftermath of the Fed’s first post-QE rate hike. This may offer a bit of support to higher-yielding FX including the Aussie and Kiwi Dollars. The moves may struggle for follow-through however as markets look ahead to higher-profile data releases due later in the week.

Asia Session

21:00NZDWestpac Consumer Confidence (4Q)110.7-106.0
21:45NZDNet Migration SA (NOV)6260-6220
02:00NZDCredit Card Spending (MoM) (NOV)0.7%-1.8%
02:00NZDCredit Card Spending (YoY) (NOV)8.5%-7.8%
04:30JPYAll Industry Activity Index (MoM) (OCT)1.0%0.9%-0.2%
05:00JPYSupermarket Sales (YoY) (NOV)-1.0%-2.8%
05:00JPYBOJ December Monthly Economic Report---

European Session

07:00EURGerman PPI (MoM) (NOV)-0.2%-0.4%Medium
07:00EURGerman PPI (YoY) (NOV)-2.4%-2.3%Medium
07:00JPYConvenience Store Sales (YoY) (NOV)-2.5%Low
08:00CHFM3 Money Supply (YoY) (NOV)-1.4%Low
08:00CHFTotal Sight Deposits (DEC 18)-467.7BLow
08:00CHFDomestic Sight Deposits (DEC 18)-401.4BLow
11:00GBPCBI Reported Sales (DEC)217Low
15:00EUR Eurozone Consumer Confidence (DEC A)-5.9-5.9Medium

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.