The rates continue within the downward trend in favor of the USD as in New Zealand for a long time observed an economic downturn amid the trade conflict between China and the United States. This led to a rapid depreciation of the NZD with the achievement of multiyear lows in 2019. Moreover, the stimulus for recovery was consistently lacking, at least until early September.
This month, demand for risky assets has risen sharply. Investors hope for an improvement in the negotiations between China and the United States. In September, the NZD finally found time to recover, amid the weakening of the negative impact of external factors. Recent macroeconomic reports from China are encouraging investors and motivating them to invest in commodity currencies. Reducing tensions in international trade allow the RBNZ to postpone the reduction of the rate. This was enough to strengthen the NZD in the absence of reports on the economy of New Zealand.
Given the optimism on the market, the dollar successfully strengthened against safe assets and the Euro. This was facilitated by the speech of Jerome Powell, who was optimistic about the state of the US economy and refuted opinions about a possible recession. However, recent reports do not contribute to the strengthening of the dollar as before. In particular, according to the reports, there is a reduction in the number of open vacancies for the third month in a row. Perhaps the situation will change this week with the publication of data on retail sales, the producer price index and the consumer price index.
We believe that the favorable situation for commodity currencies and risk assets, including the USD, will remain in the near future. However, in the confrontation between the USD and the NZD, the most optimal deals will be on the trend, in the short and long term, also taking into account the signal of the Stochastic oscillator about the rates in the overbought zone, which means the completion of the price correction.
