NZD/USD Drops on US Dollar Bids, Wall Street Losses

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New Zealand Dollar, NZD/USD, Business PMI, Covid, Technical Forecast – Talking Points

  • New Zealand Dollar falls vs USD as broader risk aversion boosts haven flows
  • NZ Business PMI falls sharply for August, detracting from recent GDP optimism
  • NZD/USD may find support from rising moving average in flag pattern

Friday’s Asia-Pacific Forecast

Asia-Pacific markets may close lower on Friday after risk aversion heated up Thursday on Wall Street. The Dow Jones Industrial Average (DJIA) lost 0.18% at the close. Treasury yields gained for a second day as better-than-expected US retail sales figures crossed the wires. This may have further aided the view that this week’s CPI reaction was overdone. The US Dollar caught a bid on haven flows. The risk-sensitive New Zealand Dollar fell versus the Greenback.

The growing Covid-19 Delta strain threat, along with concerns over high valuations in equity markets, appears to be driving the bout of risk aversion. Economic data is throwing mixed signals this week. The August Australian jobs report revealed a big 146.3k loss on Thursday. However, New Zealand’s second-quarter gross domestic product growth climbed to a record high on a quarterly basis. Analysts appear to be giving more weight to the Australia employment report, perhaps due to the data’s more timely reflection of the economic situation.

Speaking of economic data, New Zealand’s business PMI for August crossed the wires this morning. The purchasing managers’ index fell to 40.1 from 62.6 the month prior. That doesn’t bode well for the Kiwi economy and detracts from the optimistic outlook for a strong third quarter following the robust Q2 growth. The New Zealand Dollar was largely unchanged on the weak data print.

The rest of Friday’s session sees a rather light economic docket, with trade data from Singapore, new car sales out of Thailand, and foreign exchange reserves for India set to cross the wires. The United States will report preliminary consumer sentiment data for September tomorrow. Inflation expectations will accompany the data from the University of Michigan, shedding light on where consumers see prices going.

New Zealand Dollar Technical Forecast

The New Zealand Dollar entered a downward consolidation pattern earlier this month versus the US Dollar. That followed a sharp runup from mid-August when prices hit a fresh 2021 low. The price action outlines a Bull Flag pattern, suggesting that prices may breakout higher. The rising 20-day Simple Moving Average (SMA) may provide support, with prices currently at the pattern’s support level.

NZD/USD 8-Hour Chart

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Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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