New Zealand Dollar May Rise After Pullback As Market Mood Brightens

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New Zealand Dollar, NZDUSD, Chinese Economic Data – Talking Points

  • Wall Street ends day mixed but futures extend on stimulus progress
  • Chinese economic data ahead may dictate sentiment in Tuesday trading
  • NZD/USD rises after traders take profits at 127.2% Fibonacci extension

Wall Street trading was mixed on Monday with the Dow Jones and S&P 500 falling 0.62% and 0.44%, respectively. Meanwhile, the tech-heavy Nasdaq Composite gained 0.50%, with pharmaceutical stocks within the index soaring as M&A activity from AstraZeneca and Alexion injected fresh optimism into the sector. Traders appeared more cautious overall however, with the VIX volatility index – investors’ so-called “fear gauge” - rising over 6% on the day.

U.S. futures traded higher following the closing bell after a bipartisan group of Congressional lawmakers presented a $748 billion aid package. While it remains unclear if Senate Majority Leader McConnell and House Speaker Pelosi will support the measure, many see it as a step in the right direction. The time for a relief bill is now critical with the recent stopgap extension set to expire on December 11, and eviction protections at the end of December.

S&P 500, Nasdaq 100, VIX Index – 30 Min Chart

SPX vs NDX

Chart created with TradingView

Tuesday’s Asia-Pacific Outlook

Although Wall Street saw a mixed day, the Asia-Pacific session may fare better after the upbeat stimulus news following the New York closing bell. The New Zealand Dollar is trading marginally higher against the US Dollar after two days of losses. NZD/USD remains just under its recent multi-year highs, however. New Zealand remains virtually free from Covid, and recently announced plans to allow quarantine-free travel with Australia beginning next year.

Economic data from China is also on tap for this session. It may inject some movement into the sentiment-sensitive Kiwi with Chinese fixed asset investment, industrial production, retail sales, and unemployment data due out at 02:00 GMT time according to the DailyFX Economic Calendar. Upbeat data prints may see NZD/USD react to the upside.

DailyFX Economic Calendar

DFX calendar

Source: DailyFX

The technical setup in the Kiwi appears to suggest that the currency is primed to continue pushing to fresh multi-year highs, with the recent lull in momentum looking like a brief rest for bulls after recent strength. The current move from the March lows places NZD/USD directly under the 127.2% Fibonacci extension of the December 2019 high and March 2020 low, which may help explain some profit-taking recently.

NZD/USD Daily Chart

NZDUSD

Chart created with TradingView

NZD/USD TRADING RESOURCES

--- Written by Thomas Westwater, Analyst for DailyFX.com

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