US-China Deal Strengthens NZD as USD Faces Pressure

UPDATE: A preliminary deal between the U.S. and China has plunged the USD into a tailspin, significantly boosting the NZD (New Zealand Dollar) as of this morning. Following a less-than-expected U.S. CPI report on October 20, 2023, the market is reacting to heightened risk sentiment, pushing the greenback to the sidelines.

The USD has shown vulnerability, remaining under pressure as positive market sentiment prevails. The Federal Reserve is widely anticipated to announce a 25 basis point cut during their policy meeting tomorrow, further complicating the dollar’s position.

The RBNZ (Reserve Bank of New Zealand) recently cut rates by 50 bps, bringing the OCR to 2.5%, the lower bound of their neutral range. This easing bias reflects their cautious approach, as RBNZ officials like Conway emphasize a need to “feel their way” through current economic conditions.

Market analysts report that the likelihood of another rate cut in November stands at an impressive 91%, solidifying the NZD’s bullish momentum. The currency surged past a critical resistance zone at 0.5780, with buyers now eyeing a target of 0.5850 as they position for further gains.

On the technical front, the daily chart indicates a clear upward trend for NZDUSD, with buyers expected to maintain their momentum unless prices drop below the new support level. The 4-hour chart shows a defined trendline that could serve as a safety net for buyers, while sellers are poised to capitalize on any downturns.

The upcoming FOMC meeting promises to be a pivotal event, with traders closely monitoring the outcome for indications on future monetary policy. Simultaneously, the impending Trump-Xi meeting on October 26, 2023, could further influence market dynamics, making immediate action essential for traders and investors alike.

As the situation develops, all eyes will be on the USD and NZD movements, highlighting the importance of staying informed about global economic trends. The volatility in currency markets poses both risks and opportunities, with traders urged to act decisively.

Stay tuned as we continue to monitor these developments and their implications for both the U.S. and global economies.