- NZD / USD has moved sideways from the US employment data and is consolidating around 0.7050.
- The pair recently broke down from a medium-term bullish channel, implying more choppy trading ahead.
The NZD / USD It has been moving sideways in recent trading, with price action swinging on both sides of the 0.7050 level. Currently, the pair is trading at a loss of around 30 pips for the day, or 0.4%.
NZD underpins G10 performance chart
Today there is no news or specific issues weighing on the NZD. Rather, it appears that after an extended period of outperformance over the past month versus many of its other major G10 counterparts, the NZD is finally experiencing profit-taking, taking the wind out of its sails.
The NZD lost some momentum during Friday’s session in Asia along with the AUD after soft Australian retail sales data. Meanwhile, US employment data does not appear to have had a lasting reaction to the pair, which is trading quite strong at its pre-data levels at 0.7050.
HSBC’s spot currency trader Brent Donnelly notes “that the high Sharpe level of the (recent) rally and the prolonged and grinding nature of the move tend to mean that all short positions have been eliminated by the time it breaks.” That could mean the door is open for new shorts to pile up.
Also, Brent posits that there could be more QE from the RBNZ ahead; “NZD: It can be argued that since the RBNZ is not in the inflation mandate, but is being criticized for taking advantage of the housing market, buying foreign bonds could be a good way for it to relax in early 2021 without further stoke the animal spirits of home buyers. ” Such a move by the bank does not appear to be priced in NZD at this time.
NZD / USD breaks up downtrend channel
The NZD / USD has recently broken down from an uptrend channel, implying that more declines are ahead. For reference, on the upside, this uptrend channel links the highs of November 16, 18 and 24 and December 2 and 3, and on the downside, the uptrend channel links the lows of 13, 19, 23 and 30 November and the minimums of December 2 and 3. .
4 hour chart
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