The Bird gains altitude NZDUSD

At the risk of sounding like a broken record, the NZDUSD was again the outperformer in G10 FX overnight, driven by various tailwinds.

New Zealand

Despite concerns over energy shortages and rising inflation, equity markets have stabilised since the September volatility episode.

Supported by strong U.S. Q3 earnings reports, the VIX index has fallen towards the bottom of its 12-month range. A low volatility environment encourages risk-seeking and provides support for the NZDUSD.

Following the release on Monday of an uncomfortably high Q3 inflation reading in New Zealand as well as a repricing of central bank policy rates, the NZDUSD has received support via a move in short end interest rate differentials.

Furthermore, the Q3 inflation print has prompted revisions higher to future inflation prints and additional hikes priced into the interest rate curve. Economists at ANZ now see the Overnight Cash Rate (OCR) track reaching 2% in August 2022, just nine months away.

Lastly, a three standard deviation fall in USDCNH yesterday from 6.4250 to a low near 6.3685 for as yet unknown reasons helped the NZDUSD cement a significant technical break higher.

Specifically, yesterday’s break and close above the 200-day ma and trend channel resistance near .7100 is a significant development. It confirms that the multi-month correction from the February .7465 high is complete, and the uptrend has resumed.

Dips back to .7120/00 will likely be well supported and offer a chance to set longs looking for a rally towards the May .7316 high with scope in the medium term to .7500c.

NZDUSD Daily Chart 20th of October

Source Tradingview. The figures stated areas of October 20th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade


Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.