NZD/USD jumps ahead of Chinese lending data as USD falls amid risk-taking

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New Zealand Dollar, NZD/USD, Risk Appetite, China, Yuan Lending – TALKING POINTS

  • APAC markets set for risky trading after US CPI drags on Fed bets
  • China’s new yuan lending data for July is a potentially high-impact event
  • NZD/USD jumped overnight but lost strength at the 100-day SMA

Thursday’s Asia-Pacific Outlook

Asia-Pacific markets eye a higher open after risky assets jumped overnight. The US consumer price index (CPI) for July disappointed expectations, falling to 8.5% in July on an annual basis. That was down from 9.1% year-on-year in June and below the consensus forecast of 8.7%. The U.S. dollar plunged after the news, with traders buying short-term Treasuries betting that the inflation data would cool the Federal Reserve’s rate hike path.

The Japanese yen was one of the big winners against the USD, with USD/JPY falling more than 1.6%. The Swiss Franc, Swedish Krona and British Pound recorded gains north of 1% against the greenback. However, gold traders were not so optimistic. XAU saw a modest decline, although prices remain around 1% higher for the week. Silver prices rose slightly, while copper posted larger gains.

The New Zealand dollar, a high-beta currency, jumped almost 2% against the USD. The misfire in the US CPI eased fears of a global recession. New Zealand’s commodity exports would benefit if the global economy escaped a recession. That, and a hawkish RBNZ, helped shore up the Kiwi Dollar’s fundamental position. The RBNZ is expected to raise its official exchange rate (OCR) by 50 basis points at its policy meeting next week. Visitor arrivals to the island nation in June increased at a year-on-year pace of 83.5%, compared to 26.3% in May.

China has ended its military exercises around Taiwan, removing geopolitical tensions from the market. The British Embassy in China tweeted on Wednesday that Britain and China are set to resume passenger flights, a bright sign that suggests Chinese policymakers are moving away from the country’s “zero-Covid” policy. China’s new yuan loans for July could cross the wires today. According to a Bloomberg survey, analysts expect bank lending to fall to 1.1 trillion yuan from 2.81 trillion in June.

Notable events of August 11:

Singapore – Final GDP Growth Rate (Q2)

Australia – Consumer inflation expectations (August)

Singapore – Current Account (T2)

Thailand – Consumer Confidence (July)

China – Year-on-Year Vehicle Sales (July)

NZD/USD Technical Outlook

NZD/USD made a big move, starting from the 23.6% Fibonacci retracement before paring gains at the 38.2% Fib. The 100-day simple moving average (SMA) tracks just above this Fib level, adding a layer of Fibonacci resistance. Meanwhile, the 20-day SMA is on track to break above the 50-day SMA, a sign that recent strength may continue. A break above resistance would threaten the June high at 0.6576. Alternatively, a pullback could see prices return to 23.6% Fib.

NZD/USD daily chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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