It has been an uneventful day for NZD/USD. Currently, the pair is trading at 0.7074, down 0.18% on the day. However, the calm could quickly change, as New Zealand releases GDP for Q3 (21:45 GMT).
New Zealand GDP expected to rebound
New Zealand publishes GDP quite late, and the markets have had to wait until today for the release of third-quarter GDP. Similar to other major economies, the economy is projected to bounce back in Q3, after a dismal second quarter, courtesy of the Covid-19 pandemic. Although New Zealand has suffered only a handful of Covid-related deaths, the quick response of shutting the economy led to a severe economic downturn in the second quarter, as GDP plunged by 12.2%. The economy is expected to recover that entire decline and then some, with a forecast of 12.9% growth for Q3. On Wednesday, Finance Minister Robertson, said that the country’s budget deficit will be lower than expected, another sign that the economy is moving in the right direction. This is all good news for the New Zealand dollar, which has bulldozed over the US dollar and has climbed to its highest levels since June 2018.
Another market-mover that the markets are closely eyeing is the FOMC policy meeting (19:30 GMT). The Fed is not expected to adjust interest rates, which are close to zero. If the Fed makes any changes to the duration or amount of the current bond-purchase program (USD120 billion/mth), the struggling US dollar could lose more ground. At the same time, the Fed may feel that now is not the time to make any moves, particularly with Congress close to reaching an agreement on a massive stimulus package, after months of wrangling between the Republicans and Democrats. The Fed may be content to simply tinker with a change in language in the rate statement, which would be the equivalent of throwing a bone to the markets, which are hungry for some dramatic announcement. This evening’s FOMC meeting, the last of the year, could shake up the currency markets.
- NZD/USD faces resistance at 0.7133. The next resistance line is at 0.7178
- There is support at 0.7025, followed by support at 0.6962
- The pair remains just above the 10-day MA. A break below this line would be a sign of a downward swing