NZD / USD reaches 0.7100 for the first time since April 2018

• A coup for the NZD / USD has seen the pair break above Wednesday’s high of 0.7085 and hit 0.7100.
• The last time the kiwi reached these levels against the US dollar was in April 2018.
• Widespread USD weakness, exacerbated by strong US PMI data, has fueled the move.

The NZD / USD is seeing a solid rally on Thursday, and in recent trading it broke above its previous weekly high (set Wednesday) of 0.7085 and proceeded to briefly cross above 0.7100 for the first time since April 2018. At the time of Al To write, the NZD / USD is trading higher at just under 0.4% or just over 20 pips below 0.7100. General US weakness appears to be behind the move, with other G10 currencies also rising a similar amount against the dollar.

Weak US dollar lifts all ships (G10 currencies)

The NZD isn’t the only currency doing well against the US dollar on Thursday. In fact, GBP is up an even more impressive 0.9%, JPY is up 0.7%, while AUD, EUR and CHF are up 0.4% to 0.5% against the dollar.

No specific catalyst appeared to be directly responsible for the USD’s early slide on Thursday, although a recent batch of strong US services PMI data for November appears to have led to further losses;

Markit released its final services PMI reading for November, which was revised up to 58.4 from the preliminary estimate of 57.7, the highest reading in more than five years. Soon after, the Institute of Supply Management released its November services PMI estimate, which came in at a solid 55.9, modestly disappointing expectations of 56.0. Importantly, the employment sub-index remained above 50, which implies that employment in the service sector was expanding in the month that just ended despite the worsening situation of the virus.

Going into the data, some had argued that the strong numbers could be bullish for the USD, as they could discourage the Fed from offering more accommodations at the FOMC meeting later this month. However, this has not been the case.

US equity markets got a boost from the data, with the S&P 500 hitting new all-time highs thereafter. The risk in flows has also been seen in the currency markets (benefiting AUD and NZD rates in particular) and hurting the dollar as a safe haven.

NZD / USD continues impressive bull run

The NZD / USD has recovered by more than 7% since November 3. For most of the last three weeks, the cross has adapted very well to an uptrend channel that, to the upside, links the highs of November 16, 18 and 24 and December 2 and 3. In fact, the pair just hit uptrend resistance, which implies that gains are likely to temporarily slow. On the downside, the uptrend channel links the lows of November 13, 19, 23 and 30 and December 2 and 3.

If NZD / USD experiences a temporary pullback, solid support at the 0.7060 area (June 2018 highs) is likely to come into play. Meanwhile, if the pair continues on its bullish trajectory, a test of the March 2018 lows just above 0.7150 is likely at some point.