Trade of the Day

NZD: The NZD got a boost from NZ CPI yesterday, but subsequent comments from RBNZ Deputy Governor Bascand, that OCR cuts were a “reasonable prospect”, has seen the NZD underperform over the past 24 hours. There was little change in RBNZ OCR expectations yesterday, with a November rate cut fully priced and a terminal cash rate of around 0.56%. NZ rates were 1.5bps to 3bps higher yesterday, mainly reflecting global forces. NZ inflation-indexed bonds outperformed amidst the upside surprise to CPI however, with ‘breakeven inflation’ rates rising by 5bps (although the 10 year breakeven inflation rate is still barely above 1%). 

USD: The news that China is looking for more talks before entering into a partial trade agreement, has been behind a lot of the downturn in sentiment and USD demand. US Treasury Secretary Mnuchin has attempted to downplay the China story, saying both sides have made substantial progress and he expects a deal will get done. No immediate reaction to the US announcing sanctions on three Turkish officials, and higher tariffs from the US on Turkish steel. A broad USD negative tone persisted overnight, driven the unexpected contraction of US retail sales. The DXY index was left struggling to hold on to the 98.00 mark.

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From a technical and trading perspective the NZDCAD is potentially carving out a meaningful double bottom at the .8250 level supported by significant momentum and sentiment divergence. The third test of the descending trendline attracted buyers and the subsequent pullback appears to be supported as such I will venture long through .8350 targeting a test of trendline resistance at .8550. 

Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.