New Zealand dollar stems bleeding

The New Zealand dollar is in positive territory for a change. In the North American session, NZD/USD is trading at 0.6809, up 0.09% on the day.

It has been a rough ride for the currency, which hasn’t posted a winning daily session in some two weeks. As was the case for other minor currencies, November was brutal, with NZD/USD plunging 4.81%, its worst month since October 2017. Even March 2020, when Covid took the world by storm, was not as nasty for the kiwi, which finds itself at one-year lows.

There has been plenty of volatility in the financial markets since the Omicron variant of Covid started to spread last week, and I would expect to see continued volatility for the New Zealand dollar in these times of particular uncertainty. The currency is a bellwether of risk appetite, which has been on a downturn in recent weeks. Omicron initially caused panic in the markets, but that has been replaced by concern and uncertainty, as it’s unclear how severe a threat Omicron poses to global health systems and economies. Preliminary reports show that the variant’s symptoms are not severe, and if this is confirmed by additional data, then the collective sigh of relief should translate into a stronger risk appetite and a boost for the wobbly New Zealand dollar.

Fed bids adieu to ‘transient’ inflation

Federal Reserve Chair Powell’s testimony before US lawmakers on Wednesday may have marked a key pivot in the Fed’s stance on monetary policy. Powell said it was time to retire the word ‘transitory’ for inflation and said that the bank would consider wrapping up its bond purchase programme several months ahead of schedule. The December 15th meeting will be a live one and if the Fed does accelerate its bond purchases, the markets will be looking for clues about a rate hike.

The week will wrap up with US employment data, highlighted by the US nonfarm payrolls. This event is usually the week’s biggest release and is carefully monitored, but has become an afterthought in a week when Omicron and the Fed have dominated the headlines. Still, the nonfarm payroll report could shake up the US dollar if the consensus of 534 thousand is wide of the mark.

NZD/USD Technical Analysis

  • NZD/USD has support at 0.6746 and 0.6671
  • There is resistance at 0.6955 and 0.7089

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.