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Forex Market: NZD/USD holds gains as markets await more clues over progress on US fiscal stimulus

NZD/USD was holding gains achieved a day ago on Thursday, as US fiscal stimulus negotiations continued to occupy market focus, while investors were looking for more clarity over progress made on the potential size of the coronavirus relief package.

Yesterday investor risk sentiment received a boost, while the US Dollar retreated to lows unseen since September 2nd against major peers after US President Trump and House Speaker Nancy Pelosi added to hopes a deal on coronavirus aid was close.

“For a while, the pattern has been that when stimulus talks stalled, equities fell and the dollars were being bought due to risk-averse sentiment. But with optimistic headlines like these, the market is inclined to shift to risk-on mood and sell the dollars,” Daisuke Karakama, chief market economist at Mizuho Bank, was quoted as saying by Reuters.

Yet, prospects remain faint for the Republican-dominated Senate to approve any stimulus package prior to the presidential election on November 3rd.

Markets are also expecting the final debate between President Donald Trump and Democrat Joe Biden later on Thursday.

As of 7:33 GMT on Thursday NZD/USD was edging up 0.22% to trade at 0.6667, while extending a rebound from Tuesday’s two-week low of 0.6553. The pair has risen 0.84% so far in October, following a 1.80% slump in September, its first monthly loss since March.

On today’s economic calendar, a report by the US Labor Department at 12:30 GMT may show the number of people in the country, who filed for unemployment assistance for the first time during the business week ended October 16th, probably eased to 860,000, according to market expectations, from 898,000 in the preceding week.

Market players will be also expecting the monthly report on US existing home sales for September due out at 14:00 GMT and the quarterly report on New Zealand’s consumer price inflation for Q3 at 21:45 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 5.5 basis points (0.055%) as of 6:15 GMT on Thursday, down from 5.8 basis points on October 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6634
R1 – 0.6696
R2 – 0.6739
R3 – 0.6800
R4 – 0.6862

S1 – 0.6591
S2 – 0.6530
S3 – 0.6486
S4 – 0.6443

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