Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
What do the fundamentals say for NZD/USD?
2019-11-11 • Updated
NZD/USD has survived a prolonged period of declines since the second half of July. In September, a bullish correction has finally started. Will this recovery last? We try to answer this question by studying the fundamentals for the NZD and the USD.
The NZD side of things
New Zealand has strong trade ties to China, so the main reason for the depression of the NZD was the escalation of the US-Sino trade tensions this summer. The relationship between the two nations has warmed up a little in the recent days giving the market the desired reprieve. Investors now await a new round of talks between the United States and China in October. Although the fundamental breakthrough in the trade war is unlikely, market players are hoping that the parties will at least manage to avoid any further measures aimed at hurting each other’s exports. All in all, these hopes can give the riskier assets, the NZD included, the room for the upside. According to TD Securities, the kiwi has become undervalued and should trade around 0.66 versus the USD.
Still, the high uncertainty and volatility have to be taken into account while deciding on the sizes of stop losses and other risk management parameters of a trade: we know perfectly well that things may emerge from Donald Trump’s Twitter or other sources that can aggravate the situation once again.
The Reserve Bank of New Zealand (RBNZ) will meet on Sep. 25. The central bank made an excessive 50-bps rate cut in August which surpassed market expectations. After such a move, the odds are that the central bank will keep policy unchanged for a while to watch how the economy is doing. By the way, on Sep. 19, New Zealand will release the quarterly GDP growth numbers - these figures will matter. The lack of immediate further easing can provide the NZD with some support, especially if it’s in contrast with what the Fed does.
What about the USD?
The Federal Reserve is expected to cut federal funds rate on Sep. 18. The move is already largely priced in by the market. Traders will wait for comments and forecasts of the American regulator: they indicate the Fed’s determination to continue easing policy, the USD will suffer and NZD/USD will push higher. If the Fed seems unsure about the future rate cuts, NZD/USD won’t have such an engine to the upside and the advance will be more difficult.
NZD/USD formed a bullish engulfing pattern on the W1
All in all, factors both from New Zealand and the United States allow us to expect the continuation of the recovery in NZD/USD. Resistance levels lie at 0.6470 and 0.6530. Notice that the fundamental picture may change, so it’s very important to monitor the incoming news and market sentiment. Notice that despite the fact that we see positive opportunities for the NZD, the big change in the overall negative trend for the currency is unlikely as long as the clash between the United States and China keeps hurting New Zealand’s producers and tourism is affected by China’s growth slowdown and Brexit.
China's economy is rocketing. On the other hand OPEC+ countries take the decision to cut the production. What will be the impact on the oil price?
The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.
Let's dive into the latest developments shaping the global economic landscape. Good news first: the threat of an unprecedented US debt crisis has receded, as US lawmakers passed a bill to raise the debt ceiling and avoid a catastrophic default. Phew! But don't pop the champagne just yet, because storm clouds are still looming. High inflation, rising interest rates, and sluggish growth are challenges that have yet to disappear.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Let's dive into the world of gold. Currently, the price of gold, represented by XAUUSD, is stuck in indecision, hovering around the $1,975 mark. The market is anxiously awaiting two important factors: the release of the Federal Reserve's meeting minutes and the extension of the US debt ceiling.