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New Zealand Dollar Aims Higher on GDP Surprise as China Eases Lockdowns

New Zealand Dollar Aims Higher on GDP Surprise as China Eases Lockdowns

Thomas Westwater, Analyst

New Zealand Dollar, NZD/USD, RBNZ, APAC, Sentiment, China – Talking Points

  • New Zealand posted surprisingly strong Q2 GDP numbers, bolstering the Kiwi Dollar
  • APAC sentiment to benefit from Wall Street recovery and easing China lockdowns
  • NZD/USD is rising, but the technical outlook remains bearish after steep losses
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Thursday’s Asia-Pacific Outlook

New Zealand’s second-quarter gross domestic product (GDP) growth rate crossed the wires. The Kiwi Dollar was largely unfazed by the print, with NDZ/USD holding onto modest overnight gains. The island nation saw annual GDP growth of 0.4%, down from 1.0% in Q1. From the prior quarter, GDP grew 1.7% after a 0.2% contraction in the first quarter. The third quarter should offer a better gauge for the New Zealand economy, as travel curbs remained in place until August. Rate traders see the Reserve Bank of New Zealand (RBNZ) hiking by 50-basis points next month.

Asia-Pacific markets may open mixed following a rebound in New York. US stock indexes closed slightly higher, with the benchmark S&P 500 posting a 0.34% gain. Short-term Treasuries sold off, while the 10- and 30-year tenors saw some buying. That deepened the 2s10s yield curve inversion, indicating higher recession odds. The US producer price index (PPI) for August fell 0.1% from the prior month, dragging the annual rate down to 8.7% versus the 8.8% consensus estimate and down from 9.8% in July. The PPI data offers an optimistic signal for broader inflation. Gold fell despite the weaker USD, and bullion remains at risk of a larger breakdown.

The Japanese Yen rose against the Dollar, although USD/JPY remains above the 143 level, near its multi-decade low. In the biggest action yet, the Bank of Japan performed a rate check on Wednesday. The Yen rose after the news crossed the wires, serving as a possible precursor to direct intervention. JPY shorts are likely reducing their bets against the currency, with the 145 level identified as a potential line in the sand for the Ministry of Finance.

The city saw 35 local Covid cases for Tuesday, down from 44 the day prior. Industrial metals and demand-sensitive commodities responded to the positive news. Iron ore prices closed higher in China, rising to 732 Yuan a ton. The Australian Dollar stands to benefit if iron ore prices continue rising. WTI crude and Brent crude oil prices gained, moving over 1% higher. The US Energy Information Administration reported a 2.4-million-barrel build in crude oil stocks.

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NZD/USD Technical Outlook

NZD/USD is trading within 1% of its 2022 low set yesterday at 0.5976. A break below that level would expose prices to levels not traded since May 2020. And the short-term outlook is bearish, with prices below their major moving averages.

Bulls would need to rally above the 26-day Exponential Moving Average (EMA) before attacking the 50-day Simple Moving Average (SMA). However, the MACD and RSI oscillators are tracking below their respective midpoints. A break below 0.5976 would threaten a trendline from January.

NZD/USD Daily Chart

Chart, histogram  Description automatically generated

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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

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