- The NZD is one of the best performing G10 currencies on Monday amid a risky tone in forex trading.
- NZD / USD is currently testing the psychological level of 0.6900 as the weakness of the US dollar gains ground.
The NZD / USD is enjoying solid gains on Monday, with the pair rising more than 50 pips or 0.8% on the day, and looking to take out 0.6900 to the upside.
Risk-sensitive NZD enjoys a boost driven by vaccines
The risk assets received another injection in the arm on Monday morning, almost exactly a week after Pfizer and BioNtech’s positive vaccine announcement last Monday; Moderna released the results of its phase 3 trial, and its vaccine could be even better. Firstly, it has an efficacy rate slightly above 94.5% (the Pfizer / BioNtech vaccine was approximately 90%) and, secondly, it can be stored at refrigerator temperature (the Pfizer / BioNtech vaccine must be kept frozen, presenting a key logistics / distribution challenge).
Thus, the financial markets have cheered again; The S&P 500 is currently trading with gains of over 1.0%, while in Europe, the Stoxx 600 closed up around 1.2%. Meanwhile, crude oil markets (prior month’s Brent and WTI futures) have risen over 3% and US yields have risen again, with the yield curve steepening.
Currency markets are feeling the positive vibes too; Leading the G10 FX performance chart are risk-sensitive quintuplets NOK, NZD, AUD, SEK and CAD in that order. NOK is up almost 1% against the USD, the antipodes about 0.7% and SEK and CAD about 0.4%. Meanwhile, JPY, CHF, GBP, EUR and USD are the worst performers for the day on G10 FX, all trading virtually unchanged from each other.
Amid the lack of notable national events in New Zealand (no major data or events or speakers from the RBNZ), the NZD appears poised to continue trading based on a broader risk appetite. There is a possibility that the kiwi will be affected by a busy national schedule of events in the Tasman Sea; Outside of Australia this week there are some major RBA speakers, as well as crucial retail sales and labor market data for October that could shift the AUD (and thus potentially the NZD in sympathy as well).
Returning to the USD side of the equation, as well as the rebound in risk sentiment, one could say that the USD is also being weighed by disappointing manufacturing data from the New York Fed. The regional manufacturing survey index came in at 6.3, disappointing expectations of 13.5 and down from 10.5 last month, an early sign of a slight deterioration in US manufacturing conditions this month.
NZD / USD set to break new multi-year highs
Last week’s NZD / USD high of 0.6914 appears to be taken if the pair can handle a breakout above the 0.6900 psychological level this week. Above that level, significant resistance resides in the 0.6940 region (January, February and March 2019 highs), followed by the December 2018 high at 0.6970.
On the downside, a significant support is between 0.6790 and 0.6810; The low of last Friday is located at 0.6810 and below the psychological level of 0.6800 are the highs of September 2 and 18 at 0.6790 and 0.6798 respectively.
Looking at the pair on a shorter time horizon, Monday’s early Asian and European double top at 0.6890 should provide decent intraday support. Below that, the 0.6850 level appears to have elicited a decent reaction each time it has been reached in recent days, either by acting as a decent support or resistance or by seeing a rise above or below the level.
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