New Zealand Dollar, NZD/USD, Omicron, South Korea, Technical Forecast- Talking Points
- Asia-Pacific markets look to open higher ahead of New Year holiday
- Fears over Omicron continue to subside despite high case levels
- NZD/USD forms a Bullish Engulfing candlestick after overnight price gain
Thursday’s Asia-Pacific Forecast
A broadly weaker US Dollar helped boost the New Zealand Dollar overnight as Omicron fears receded further despite another round of big daily case increases across key economies. Earlier this week, New Zealand reported its first case of Omicron in Auckland, but the government is reportedly not considering tightening local restrictions. Chris Hipkins, the Covid-19 Response Minister, will brief the media today. The New Year holiday this weekend will see various markets closed early across APAC, Europe and the United States.
Stocks on Wall Street moved modestly higher overnight, with the Dow Jones Industrial Average (DJIA) closing 0.25% higher, while technology stocks lagged. The S&P 500’s “fear gauge” VIX index fell to its lowest level since November 18, suggesting traders are becoming less fearful of a big drop in equity prices. Treasury yields rose across most tenors, with the short-end of the curve outpacing longer-dated rates. The US Treasury auctioned $56 billion in seven-year notes that were met with weak demand. However, with many traders out for holiday leave, the lackluster demand isn’t all too surprising.
Speaking of bonds, China’s rate on its 10-year note fell to the lowest level since June 2020 overnight. The increased demand for China’s sovereign bonds follows a liquidity boost earlier this week by the People’s Bank of China (PBOC). The 190 billion Yuan (~30 billion USD) injection was the largest in nearly two months. Analysts expect further easing measures early next year, which could put additional pressure on yields.
China appears poised to take a more aggressive approach to support growth in the coming months as the economy attempts to recover from property sector woes brought on by Evergrande earlier this year. Evergrande missed another set of coupon payments earlier this week and triggered the 30-day grace period on those bonds.
Turning to the economic docket, we saw a data dump out of South Korea this morning. Industrial production for November crossed the wires at a seasonally adjusted 5.1% m/m versus the Bloomberg consensus forecast of 2.5%. Manufacturing production also increased in November at a 6.2% y/y rate. However, construction output (Nov) slipped 5.6% y/y. Outside of South Korea, today only offers a couple of low-impact data points out of the Philippines and Thailand.
NZD/USD Technical Forecast
NZD/USD gained 0.38% overnight, with an intraday move cracking the highest level since the beginning of December. The 78.6% Fibonacci retracement from the December high/low appears to be a point of resistance. A clean break above that level opens the door for prices to test the December high at 0.6867. MACD and RSI are trending higher, a positive sign for bulls. Moreover, a Bullish Engulfing candlestick formed on the overnight daily candle, which may further boost technical sentiment.
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