USD slumps, NZD hit fresh highs

The NZD is the strongest and the USD is the weakest (with the JPY weaker as well) as traders go “risk on” again.
There remains a level of dissonance in market sentiment, between the reopening of locked-down economies on the one hand, and tensions between the US and China and Australian and China (which are translating into tariffs on trade) on the other. Regarding Aussie vs China spat, an editorial in China’s state-controlled Global Times today described Australia as being a “giant kangaroo that serves as a dog to the US.”.
Markets have also been dealt a lesson in placing too much optimism in a quick vaccine solution to the coronavirus pandemic. Overall, the momentum of reopening economies is maintaining a sense of optimism in markets. Incoming data to Japan (Tankan business survey and machinery orders), Australia (retail sales) and the UK and Eurozone (inflation), have had little impact, with markets remaining desensitized to data as investors try an fathom the scope for economic rebound as economies reopen.
Hence despite the uncertainties over a vaccine, there’s been good news out of China as it reports 95.4% of major industrial firms employees have returned to work. In Germany and Sweden, there is good news on the spread as well. And Singapore is talking about reopening its border with Australia, New Zealand, China, and South Korea. And in the US, many states are reopening.
Hence as the Dollar slumps with majors seeing narrow ranges, the commodity currencies have lifted and more precisely New Zealand Dollar.
NZDUSD has posted more than 1% rally, NZDJPY is up by 0.92% retesting 2-month highs while GBPNZD broke 200-day SMA for the first time since December 2019. The latter sustains a down channel since mid April, which dived today below the 2.00 psychological mark.

According to the RSI, the market maintains negative momentum in the medium-term as the indicator is posting lower peaks since the 3rd of April, while it negatively sloped below its neutral threshold of 50 since April 22. The MACD lines meanwhile MACD lines continue to deccelerate to 6-month lows, something that add conviction to the downside break. Nevertheless the fast Stochastics suggest that further weakness is possible since it is still points down.

As the asset heasing southwards, next Support levels could be identify on 161.8% Fibonacci retracement level of the upleg last week and at the 100%and 127.2% Fibonacci extension from the swing seen between 4-14 of May.

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Andria Pichidi

Market Analyst

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