Forex Market: NZD/USD set for largest monthly gain since December, markets weigh data-driven optimism and virus-related fears

NZD/USD retreated for a third straight trading day on Tuesday, as market sentiment was caught between two currents – optimism driven by better-than-expected US housing and Chinese manufacturing data and concerns that the rapid spread of the coronavirus across the globe could endanger V-shaped economic recovery.

“Markets are jumpy. Tension remains between economic and virus pickup,” Moh Siong Sim, FX analyst at the Bank of Singapore, said.

Still, the major pair was set to register its best monthly performance since December, now being up 3.29%, following gains in April and May.

As of 11:36 GMT on Tuesday NZD/USD was edging down 0.14% to trade at 0.6412, after touching an intraday low of 0.6385 during mid-European session, or a level not seen since June 22nd (0.6382). The major pair has slipped 0.28% so far during the current week, erasing gains from the prior week.

In terms of economic calendar, at 13:45 GMT today ISM-Chicago Inc will report on manufacturing activity in the region. The Chicago Business Barometer probably remained in the contraction area for a tenth straight month in June, according to market expectations, coming in at 45.0. In May, the gauge was reported at 32.3, which has been the lowest reading since March 1982 as business confidence worsened further amid the coronavirus crisis.

Confidence among US consumers probably continued to improve in June, with the corresponding index coming in at 91.8, according to expectations. In May, the gauge was reported at 86.6. The Conference Board research group will release the official data at 14:00 GMT.

At 15:00 GMT Federal Reserve President for New York John Williams is expected to speak at the live-streamed Institute of International Finance “Central Banking in the Age of Covid-19” Summit, while at 16:30 GMT Federal Reserve Chair Jerome Powell and US Treasury Secretary Steven Mnuchin are scheduled to testify before the House of Representatives Financial Services Committee about the coronavirus response.

Kiwi traders will be also paying attention to the May data on NZ building permits, due out at 22:45 GMT. The number of permits issued for new dwellings in New Zealand decreased at a monthly rate of 6.5% to a seasonally adjusted 2,503 in April.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 6.3 basis points (0.063%) as of 10:15 GMT on Tuesday, down from 7.9 basis points on June 29th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6422
R1 – 0.6441
R2 – 0.6462
R3 – 0.6481
R4 – 0.6500

S1 – 0.6402
S2 – 0.6383
S3 – 0.6362
S4 – 0.6341