NZD/USD resumed slide on Tuesday, as the kiwi dollar remained under pressure amid continuing lockdown restrictions in Auckland and expectations of further monetary easing by Reserve Bank of New Zealand in the future.
The New Zealand Dollar retreated despite broad weakness of its US counterpart.
The US Dollar weakened against a basket of six major peers on Tuesday, as US government bond yields dropped, while softer-than-expected manufacturing data in New York added to concerns over a sluggish US recovery. The New York Empire State Manufacturing Index plunged to 3.7 in August from a reading of 17.2 in July, while market consensus had pointed to a much slower drop – to 15.0.
The greenback also lost its safe haven appeal due to market optimism that US-China trade relationship can last despite frictions between the two economic superpowers on other fronts. With the review of the “Phase One” trade deal between Beijing and Washington postponed, the achieved agreement remains intact, which contributed to markets’ risk-on mood.
Net short positions on the US Dollar rose to their highest level since May 2011 last week, according to latest CFTC data.
As of 7:14 GMT on Tuesday NZD/USD was edging down 0.11% to trade at 0.6549, while moving within a daily range of 0.6534-0.6568. The pair traded not far from the one-month low registered on August 12th. The major pair advanced 2.70% in July, which marked its fourth straight month of gains. NZD/USD has retreated 1.17% so far in August.
From macroeconomic perspective, today market players will be paying attention to US housing data at 12:30 GMT. The number of housing starts in the country probably rose to 1.237 million units in July, according to market expectations, from the seasonally adjusted annual rate of 1.186 million in June. The latter has been the highest level since March.
Meanwhile, the number of building permits probably increased to 1.313 million in July from an annual level of 1.258 million in June.
Kiwi traders will be also expecting New Zealand’s quarterly data on producer prices at 22:45 GMT.
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 10.9 basis points (0.109%) as of 6:15 GMT on Tuesday, down from 11.7 basis points on August 17th.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 0.6550
R1 – 0.6581
R2 – 0.6604
R3 – 0.6635
R4 – 0.6666
S1 – 0.6526
S2 – 0.6496
S3 – 0.6472
S4 – 0.6448