New Zealand Dollar, NZD/USD, Economic Data, Event Risks, Technical Outlook – Talking Points
- New Zealand Dollar is up slightly, but risk-on stance may be weak after poor AU PMI data
- Week ahead may be volatile, with high-impact events in the Asia-Pacific and the US
- NZD/USD up slightly, but bears may attack the December low at 0.6699 on a bout of weakness
Monday’s Asia-Pacific Outlook
The New Zealand Dollar is marching higher against the US Dollar in early Asia-Pacific trade, indicating that risk aversion seen last week may be subsiding. However, poor PMI data out of Australia this morning shows that the Covid Omicron variant is having a very real effect on demand within the Aussie economy. That hit was coupled with a drop in business confidence despite another round of lockdowns through most of Australia.
Later today, Japan will release its own set of PMI data for January from Jibun Bank. The Japanese Yen is weaker this morning versus its major FX peers, as the tone looks to be “risk on” despite the downbeat Aussie PMI print. Singapore is set to report December inflation data, with analysts expecting the year-over-year rate to cross the wires at 3.75%, according to a Bloomberg survey.
This week will bring several potentially high-impact events across the wires that may shift market sentiment. Australia’s fourth-quarter inflation rate is due out Tuesday when the headline figure is expected to drop at 3.2% y/y. That would be up from 3.0% y/y in Q1. New Zealand is next up to bat on inflation data, with Q4 data seen dropping at 5.6% y/y on Wednesday. The Kiwi economy has experienced a higher rate of inflation versus its cross-Tasman counterpart, which may account for the more aggressive RBNZ response as compared to the RBA thus far.
Outside of the Asia-Pacific region, the United States will see the first Federal Open Market Committee (FOMC) policy decision of the year. The central bank is expected to stand pat on its benchmark rate, and in fact, Chair Powell may temper market expectations, that currently show nearly four 25 basis point hikes priced in for 2022. That may pressure the US Dollar. The Fed’s preferred inflation metric, the core PCE price index, will follow later this week.
NZD/USD Technical Forecast
NZD/USD is up slightly this morning following a brutal 1.25% loss last week. The recent bearish action has dragged prices down near the December low at 0.6699, which was the 2021 low. Bears may attempt to take advantage of any weakness and pierce below the level. That would likely open the door for additional weakness. Alternatively, a move higher will target the 78.6% Fibonacci retracement as possible resistance.
NZD/USD Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter