New Zealand Dollar, NZD/USD, Bank of Japan, Omicron – Talking Points
- New Zealand Dollar rose versus a broadly weaker US Dollar overnight
- Bank of Japan rate decision due out today – no change to rates expected
- NZD/USD up against the falling 20-day Simple Moving Average (SMA)
Friday’s Asia-Pacific Forecast
Asia-Pacific markets may be set for a volatile open after high-growth stocks led losses on Wall Street overnight. The Omicron threat and central bank tightening are weighing on sentiment ahead of a “triple witching” close to the week in New York. Technology stocks were the largest losers, with the Nasdaq-100 Index (NDX) closing 2.61% lower. An earnings report from Adobe Inc showed lackluster guidance for the next full fiscal year.
The overnight Bank of England rate hike surprise also added to the worries seen over a higher rate environment. Equities, especially high-growth ones, historically underperform in rising rate environments. The BoE opted to increase its benchmark rate by 25 basis points, making it only the second major central bank to begin hiking rates in the current post-Covid cycle. The British Pound gained against a broadly weaker US Dollar.
This morning, ANZ Bank New Zealand reported its business confidence index for December at -23.2. That is down from -16.4 in November. The bank’s activity outlook reading also weakened from 15.0 to 11.8. The Reserve Bank of New Zealand (RBNZ) was the first major central bank to begin hiking rates this year.However, the Kiwi has fallen sharply against the British Pound since November.
Later today, the Bank of Japan is set to deliver its own interest rate decision, although analysts expect no big changes in policy to cap the year off. Still, the BoJ reduced the purchases of exchange-traded funds (ETFs) earlier this year, as well as the amount of corporate debt the central bank purchases. An official announcement over the scaling back of more debt may cross the wires today, but the Omicron variant may have policymakers hesitant to make any changes.
NZD/USD Technical Forecast
NZD/USD is nearly unchanged through the starting hours of Asia-Pacific trade after making a move higher overnight. A bullish Engulfing Candlestick formed earlier this week after defending the December swing low. Prices are now up against the falling 20-day Simple Moving Average (SMA). A break above the SMA would see the December high at 0.68677 shift into focus as potential 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 @FxWestwateron Twitter