New Zealand, NZD/USD, Trade Balance, Bank of Japan, ECB – Talking Points
- New Zealand dollar faces growing New Zealand trade deficit
- Bank of Japan Set to Maintain Stable Policy, USD/JPY in Eyes
- NZD/USD rally stops at its 26-day EMA amid RSI weakness
Thursday’s Asia-Pacific Outlook
Asia-Pacific markets look set for a mixed open as traders brace for the Bank of Japan’s policy decision. U.S. stocks rose overnight on Wall Street, with the tech-heavy Nasdaq-100 (NDX) index rising 1.55% at the closing bell. The S&P 500’s “fear gauge” VIX index fell to its lowest level since April, possibly signaling that traders are confident that a market bottom was found in June.
Bitcoin pared its first gains after Tesla, the electric vehicle maker, revealed that it had sold most of its Bitcoin holdings for fiat currency. The top U.S. aluminum producer, Alcoa, beat estimates, but profits fell from the previous quarter due to lower aluminum prices. Aluminum prices fell almost 25% from April to June.
The US dollar rose on the weak euro after Italian Prime Minister Mario Draghi’s government fractured as three parties boycotted a confidence vote. Political turmoil is weighing on confidence as Europe needs more unity than ever amid a looming energy crisis. The upcoming elections will likely see Italy’s far-right parties gain strength, which could split Europe’s resolve against Russia. EUR/USD, meanwhile, faces a policy decision from the European Central Bank tonight. The euro could weaken if policymakers propose a 25 basis point rate hike.
The Bank of Japan will announce its decision on interest rates a few hours before the ECB. Markets expect the BoJ to remain firm on its ultra-accommodative policy, but inflation and economic growth targets are likely to see changes. USD/JPY could rise unless the BoJ launches a hawkish surprise, as this would likely force short positions to hedge.
NZD/USD Technical Outlook
NZD/USD’s early week momentum appears to be exhausted as prices struggle to climb above the 26-day exponential moving average (EMA). Traders made a failed intraday attempt, which saw prices briefly eclipse the 38.2% Fibonacci retracement. The Relative Strength Index (RSI) weakened just below the midpoint of the oscillator, highlighting the loss of momentum.
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