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Daily brief: NZD/USD submits to stronger US dollar as traders prep for volatility


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Market sentiment swings as FOMC and other high-impact events near; Australian inflation data may see AUD rally if it supports RBA rate hikes and NZD/USD may fall after multiple failed attempts to clear Fibonacci level.

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Source: Bloomberg
 
 

Wednesday’s Asia-Pacific outlook

Asia-Pacific markets face a mixed open after US stocks fell during regular trading hours. However, a set of rosy earnings reports from Alphabet Inc. and Microsoft saw US stock futures climb early this morning. The Federal Reserve is slated to deliver a 75-basis-point rate hike at Wednesday’s FOMC meeting. A hawkish tone from Mr. Powell’s central bank may see the US dollar gain further.

Australia’s second-quarter inflation data is seen crossing the wires at 6.2% today. That would be up from 5.1%. The Australian dollar fell against the US dollar but rose against the New Zealand dollar overnight, suggesting underlying strength in the Aussie dollar. An Aussie dollar rally would likely occur if today’s inflation data beats estimates, especially if market sentiment improves.

China’s Covid cases climbed for Monday, according to CCTV. The Chinese news station said new Covid cases increased to 868 for Monday, up from 680 on Sunday. Officials in Shenzhen ordered new restrictions, telling companies to limit workers to those who are in bubbles, being those who do not have much contact with the general public. Those companies include Foxconn, a major iPhone manufacturer. China’s industrial profits data for June are expected out at 01:30 GMT.

European and US natural gas prices rose. US prices are up as weather forecast for the continental United States sees seasonally elevated temperatures over the next ten days. EU prices climbed after Gazprom, Russia’s natural gas company, further reduced flows through the Nord Stream 1 Pipeline despite EU countries agreeing to scale back demand by 15%.

Notable events for July 27

  • Japan – Coincident Index Final (May)
  • Japan – Leading economic Index Final (May)

NZD/USD technical outlook

NZD/USD struggled to hold above its 38.2% Fibonacci retracement level, falling back below 0.6250. The past three trading sessions have seen intraday attempts fail above that Fib levels showing a significant amount of selling pressure around the price level. A drop to the 20-day Simple Moving Average and 23.6% Fib level may be on the cards after the repeated failed attempts.

NZD/USD daily chart

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Source: TradingView

Thomas Westwater | Analyst, DailyFX, New York City
27 July 2022

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