- NZD / USD is down, amid broad US dollar strength across the board.
- COVID-19 cases are on the rise in Europe, spurring demand for safe haven assets.
- Fed’s Waller and Clarida: Aim for a faster QE downsizing pace so the US central bank can have some room to maneuver.
- Money market futures were up 25 basis points by the RBNZ at its Monetary Policy Meeting on November 24.
The NZD / USD it plummets for the third week in a row, trading at 0.6996 during the American session at the time of writing. Depressing sentiment in financial markets stimulated demand for safe haven currencies such as the US dollar, the Japanese yen and the Swiss franc. Additionally, major US stock indices are down, except for the high-tech Nasdaq 100, which is up 0.56%.
COVID-19 cases on the rise in Europe, taking a toll on market sentiment
As the weekend approaches, a fourth wave of COVID-19 in Europe clouds the economic outlook. Rising cases in Eastern Europe threaten an economic slowdown just around the corner. Austria reimposed restrictions on the coronavirus, with a 20-day lockdown for vaccinated and unvaccinated people. Meanwhile, in Germany, the situation is no better, as some parts of the country closed non-essential businesses, while the Netherlands has already ordered the early closure of shops and bars.
Going back to the NZD / USD pair, the overnight session witnessed a 50 pip drop in just three hours. It broke some pivot point support levels on its way down, but the move was limited around the 0.6990 area, close to Thursday’s low. Furthermore, as market liquidity evaporated in the closing hours of the session heading into the weekend, the pair remains subdued within the 0.6990 to 0.7020 range.
On the macroeconomic agenda, New Zealand has not published any data. In the US, different members of the Fed made statements.
On Friday, Fed Governor Christopher Waller suggested that the US central bank could double the pace of its QE to $ 30 billion per month to end in April 2022. In addition, he added that accelerating the pace would give the Fed room for rate hikes as early as the second quarter of 2022.
After Walles’s intervention, Fed Vice Chairman Richard Clarida said that “it might be very appropriate” to discuss the acceleration of the rate of reduction of bonds, in line with other Fed authorities. In addition, he added that he sees risks bullish for inflation and said that the economy is in a very strong position and that it looks like the fourth quarter is going to be very good.
The focus of NZD / USD traders will be on New Zealand Retail Sales and the Reserve Bank of New Zealand Monetary Policy Meeting in the coming week. Meanwhile, the US economic docket will offer durable goods orders, Q3 GDP, PCE (the Fed’s favorite inflation gauge), and FOMC minutes.
Technical levels
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