NZD/USD is hanging out at a key support zone ahead of the RBNZ’s policy decision!
How low can NZD/USD go in the next trading sessions?
Before moving on, ICYMI, yesterday’s watchlist looked at EUR/AUD’s pullback setup ahead of the RBA’s policy decision. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
S&P Global US Manufacturing PMI for September: 49.8 vs. 47.9 previous; “Inflationary pressures strengthen but remain historically muted”; “modest rise in employment”
ISM U.S. Manufacturing PMI for September: 49.0 (48.1 forecast; 47.6 previous); Prices Index decreased to 43.8 (48.9 forecast; 47.9); Employment Index increased to 51.2 vs. 48.5 previous
NZIER quarterly business survey showed business confidence improving from -63 to -53 in Q3; “Higher interest rates are starting to dampen demand in the New Zealand economy”
U.K. shop price inflation eased from 6.9% to 6.2% in September, its lowest in a year – BRC
Australia’s job advertisements dipped by 0.1% (vs. 1.7% previous) in September; In the three months to September, “ads had been concentrated in education and healthcare, which helped offset weakness in tech and food preparation.”
Australia’s building approvals rose by 7.0% in August (vs. 2.7% expected, -7.4% previous)
As expected, the RBA kept its interest rates at 4.10% in September; “Some further tightening of monetary policy may be required”
Price Action News
“Risk” assets like the Australian dollar started the day on a weak note thanks to Asian session traders taking their cues from yesterday’s U.S. session selloff.
It also didn’t help the commodity-related currency that the Reserve Bank of Australia (RBA) kept its interest rates at 4.10% for a fifth month in a row and showed little inclination to raise its interest rates again any time soon.
AUD saw a slow but steady downswing across the board. It’s clocking in its biggest intraday losses against EUR, JPY, and USD and is losing the fewest pips to NZD.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. JOLTS job openings at 2:00 pm GMT
RBNZ’s monetary policy decision at 1:00 am GMT (Oct 4)
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Hawkish Fed bets and overall risk aversion have been pushing the U.S. dollar higher against “riskier” assets like EUR, AUD, GBP, and NZD for the past couple of days.
NZD/USD, in particular, is down by 100 pips from its highs last week. In fact, the pair is trading closer to the .5900 psychological handle that lines up with today’s S2 Pivot Point.
Can NZD/USD extend its losses in the next trading sessions?
We won’t see top-tier releases in the U.S. today but the JOLTS job openings report may inspire positioning ahead of this Friday’s U.S. NFP report.
Meanwhile, the RBNZ’s October policy decision is scheduled during the early Asian session. The central bank is expected to keep its interest rates unchanged though members may maintain their hawkish biases.
If the risk-off theme extends to the next trading sessions, or if the markets react to the RBNZ’s “hawkish hold” similar to how they reacted to the RBA’s decision, then we may see NZD/USD break the .5900 area of interest and head for previous inflection points like .5860.
But if traders adopt a “soft landing” market theme, or if the RBNZ’s decision turns out to be bullish for NZD, then NZD/USD may bounce from its support zone. It may even revisit the .6000 major psychological handle or .6040 previous high!
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