• NZD/USD is moving into positive territories again and has pierced the 21-day moving average.
  • Risk-on markets were supportive of the commodity complex overnight as US/Sino trade talks gain positive momentum again.

The NZD was picking up a bid overnight, reversing the risk-off sell-off that ensued following a series of negative trade headlines earlier in the week which was topped off by the South China Morning Post story in Asia yesterday. The story suggested that there will be no deals, that the Chinese would leave Washington a day early and were bemused by the US State Departments recent blacklisting of 28 Chinese companies, government offices and security bureaus over their alleged role in facilitating human rights abuses in China's Xinjiang region.

However, NZD/USD rallied overnight from a low of 0.6227 to a high of 0.6335 following the Bloomberg and NY Times stories that indicated a partial deal would be in the making this week while suggesting an easing of restrictions on Huawei and possible delays to additional tariffs. Trump was also vocal about meeting with top-level negotiators in Washington tomorrow – It was announced that Trump will meet Chinese Vice Premier Liu today. Liu met with top US trade negotiators, Steven Mnuchin and Robert Lighthizer, overnight which was the first time the two sides have met since July.

Looking ahead

Looking forward, there will be a focus on New Zealand's Consumer Price Index. "We expect the Consumer Price Index, released next Wednesday, to show a modest 0.6% rise for the quarter," the analysts at Westpac said.

  • "The details for the September quarter are largely unremarkable in themselves, but they will be significant to the Reserve Bank.
  • Our quarterly forecast of 0.6% is a little higher than the RBNZ’s forecast of 0.5%, and more importantly, the difference is largely on the non-tradables side, where we expect a 0.9% rise against the RBNZ’s forecast of 0.7%.
  • A stronger than expected result for the RBNZ would give some reassurance that easy monetary policy is having its intended effects, though the pace of improvement has been glacial."

Westpac explained that the markets are pricing for Reserve bank of New Zealand 28basis points of easing on 13 November, with a terminal rate of 0.48%.

NZD/USD levels

The bird flew through the 21-DMA overnight and is based on the 0.63 handle again, with bulls eyeing an advance to the 50-DMA ahead of the Sep tops of 0.6450, a touch above a 38.2% Fibonacci retracement of the July highs to recent swing lows.