NZD/USD, US Dollar, CSI 300, China, Fed, Jackson Hole – Talking Points
- USD found some footing today, but it was down on the week
- APEC equities mixed with China stocks trying to rally
- Fed Chair Powell will be the focus, will he lead the taper parade?
Geopolitical fears rose sharply following two suicide bombing attacks at the Kabul airport in Afghanistan. This drove risk assets lower, with US equities breaking their winning streak and ending down on the day. Sentiment was not helped by hawkish comments from three Fed presidents – Kaplan, Bullard and George. The comments were generally covered by a caveat around the spread of the Delta variant and unfolding circumstances.
Asian equities were mixed, with China being an exception amid generally soft performance elsewhere as the PBOC signalled a cut in the reserve ratio. Consequently, the Chinese equity market benchmark CSI 300 index moved higher, aided by bargain hunters in the tech sector (despite recent regulatory issues).
Crude oil prices moved higher in Asia as concerns heightened over the approaching storm in the Gulf of Mexico and the impact on distribution as production began shutting down.
The Delta variant continues to undermine markets, with more cases throughout the region and New Zealand announcing lockdown extensions. The New Zealand Dollar has had a good rally this week as the US Dollar weakened ahead of the Jackson Hole symposium.
The NZD is regarded as a “high beta” currency for risk trading. This means that it moves more than other currencies in a risk-on, or a risk-off environment. Should there be any market surprises, the Kiwi may see some large moves.
Markets are focused on any further comments from FOMC members thatare likely to impact prices, but clearly all eyes are on the Fed Chair Powell at the symposium today. There is a growing perception that the gathering might disappoint expectations and that the real action may unfold at the next FOMC meeting on 21st-22nd September.
New Zealand Dollar Technical Analysis
NZD/USD remains in a downward sloping trend channel despite the rally this week. There are some resistance levels near the top of the near term channel top at 0.7010 and the 55-day moving average at 0.6990. Meanwhile, support levels come in at the most recent low of 0.6805 and then a number of levels clustered near the 65 cent mark.
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter