New Zealand Dollar, NZD/USD, Market Sentiment, China, Yuan – Talking Points
- New Zealand Dollar falls versus US Dollar as Fed rate hike bets accelerate
- Chinese Yuan falls to weakest levels since November versus the Greenback
- NZD/USD pushes toward bottom of December range after a sharp overnight drop
Friday’s Asia-Pacific Outlook
Asia-Pacific markets may open mixed today after another round of losses overnight on Wall Street. The risk-sensitive New Zealand Dollar fell to its lowest level of the year versus a broadly stronger US Dollar. Traders are pricing in a more aggressive rate hike outlook for the Federal Reserve. That saw Treasury yields rise across most tenors. The tech-heavy Nasdaq 100 index (NDX) fell for the third day.
Today’s economic docket offers little in the way of event risk, which may leave prevailing risk trends as the primary sentiment driver. The Philippines will update its unemployment rate for November as well as industrial production. Later in the day, China’s December foreign exchange reserves will cross the wires, with analysts expecting a $3.233 trillion figure.
Speaking of China, the Chinese Yuan fell to the weakest level versus the Greenback since November overnight. USD/CNH hit the lowest level in over three years in December and is coming off a second yearly gain against the US Dollar. However, continued Yuan strength appears less likely this year, with China aiming to bolster its exports to support growth, which a stronger Yuan would hurt.
The first economic GDP targets for the year from Beijing and Henan provinces were released this week, with draft government reports showing respective targets of 5% and 7%. National GDP targets are expected to follow in March. Analysts expect a 2022 growth rate of around 5%, which would be considerably lower than pre-pandemic figures, although still robust. The tone among Chinese policymakers suggests a national strategy targeting quality over raw growth going forward, one that focuses on protecting consumers and soaking up excess speculation in the economy.
NZD/USD Technical Forecast
NZD/USD is trading just above a fresh low for the month after prices fell sharply overnight. Prices continue to trade within the December range, with the 23.6% Fibonacci retracement providing a level of support. A break below that would expose the December low at 0.6701. If that level breaks, prices may resume the downward trend seen back in November. Alternatively, a rebound will have bulls looking to overtake the falling 26-day Exponential Moving Average (EMA).
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