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Forex Market: NZD/USD trades not far from 2 1/2-year highs, remains supported by vaccine optimism, scaled back rate cut expectations

NZD/USD was holding gains achieved in the prior two trading days on Thursday, after earlier touching highs not seen since mid-June 2018, as investor risk sentiment remained underpinned by coronavirus vaccine optimism and hopes of a global recovery.

“A China-led recovery in the global economy and commodities should benefit commodity currencies,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, was quoted as saying by Reuters.

“The outlook is good, but we are reaching levels where authorities might feel some concern. Other emerging market currencies with good fundamentals should benefit.”

Additional support for the kiwi dollar was drawn from the surprising strength in the local economy and a house market boom, which prompted market players to scale back expectations of more interest rate cuts by the Reserve Bank of New Zealand.

Earlier this week New Zealand’s government asked the central bank to consider the need to contain house prices when deciding on monetary policy.

“That might make the RBNZ less gung-ho about lowering interest rates in the near term,” Dominick Stephens, Westpac chief economist for New Zealand, said.

“We were forecasting OCR cuts in April, May and August, but that timing now looks less likely. We are reviewing our OCR forecasts and will update them in due course.”

Meanwhile, the US Dollar was trading close to lows unseen in over two months against a basket of six major peers, after reports showed on Wednesday that US weekly jobless claims had increased more than anticipated, while personal income had shrunk. Some expert opinions point to more job losses, since many US states bolster restrictions on businesses in an attempt to slow the spread of the COVID-19 disease.

Trading volumes will probably remain light later on Thursday with US markets closed for the Thanksgiving holiday.

As of 10:20 GMT on Thursday NZD/USD was inching down 0.06% to trade at 0.7000, after it climbed as high as 0.7015 yesterday, or a level not seen since June 14th 2018 (0.7045). The pair has extended gains to 5.91% so far in November, following a mere 0.03% dip in October.

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 13.0 basis points (0.130%) as of 9:15 GMT on Thursday, or unchanged compared to November 25th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6993
R1 – 0.7026
R2 – 0.7048
R3 – 0.7081
R4 – 0.7114

S1 – 0.6971
S2 – 0.6938
S3 – 0.6917
S4 – 0.6895 is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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