New Zealand Dollar, NZD/USD, AUD/NZD, Trade Balance, BoJ, Crude Oil – Talking Points
- Asia-Pacific markets may fall after the FOMC rate decision boosted the US Dollar
- The Bank of Japan rate decision is in focus as USD/JPY nears the 145“red line” level
- NZD/USD trades at a key trendline after prices accelerated lower over the past week
Thursday's Asia-Pacific Outlook
The US Dollar surged higher against its major peers during New York trading hours. The Federal Open Market Committee (FOMC) announced a 75-basis point rate hike and updated its growth and inflation forecasts. The FOMC's Summary of Economic Projections (SEP) now sees lower growth, higher unemployment and higher interest rates until 2024 compared to the June SEP. The policy-sensitive 2-year US yield rose more than 10 basis points to its highest level since October 2007. The S&P 500 closed 1.71% lower.
APAC currencies, including the New Zealand Dollar and Japanese Yen , are trading lower as markets move to gauge and discount the Fed's new calculus. NZD/USD fell around 0.6% to its lowest point since March 2020. The third-quarter Westpac consumer confidence index for New Zealand recovered, rising to 87.6 from 78.7 in Q2. Although still negative (below 100), the improvement is encouraging.
The island nation's trade deficit increased in August to NZ$2.44 billion from a revised NZ$1.41 billion deficit. RBNZ Deputy Governor Christian Hawkesby is due to speak at 23:00 GMT. Against the Aussie Dollar, NZD is trading near its lowest level since 2015, set earlier this week. AUD/NZD is on track to rise for the seventh month. Australian markets are closed today for a National Day of Mourning for the late Queen Elizabeth II.
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The Bank of Japan's policy decision is in focus today as the Japanese Yen hovers just above the 144 level against the USD. Analysts expect the BoJ to hold its policy rate and 10-year yield cap steady at -0.1% and 0.0%, respectively. Japan's inflation rate hit 3.0% in August from a year ago, the highest level since September 2014. USD/JPY and Japanese bond yields may see a volatile reaction if the BoJ surprises expectations or alters its guidance.
Brent crude and WTI crude prices rose after Russia's President, Vladimir Putin, announced a“partial mobilization” to boost troop levels in Ukraine after weeks of intense fighting. But those gains faded, and prices turned negative before US markets started trading. China is reportedly set to approve a fuel export quota of 15 million tons, according to a Bloomberg report citing JLC.
The Energy Information Administration, a US government agency, reported a 1.14 million barrel crude oil increase for the week ending September 16. Gasoline and distillate products, which include diesel fuel, increased as well, rising by 1.57 million and 1.23 million barrels, respectively. Gasoline demand, measured by the four-week motor gasoline product supplied, per the report, averaged 8.5 million barrels a day, down nearly 8% from the same period a year ago. Despite the weaker gasoline demand, refineries increased operable capacity to 93.6% from 91.5% the week prior.
New Zealand Dollar Technical Analysis
NZD/USD is down over 4% since September 01. Prices are trading at the September 2021 trendline, which has acted as support several times this year. A break below the trendline would likely introduce additional selling and threaten the 2020 swing low at 0.5470. If prices hold, however, a countertrend move up to the 26-day Exponential Moving Average (EMA) is on the cards.
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
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