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MTrading Team • 2023-10-16

NZDUSD recovers on NZ political concerns but bulls remain cautious

NZDUSD recovers on NZ political concerns but bulls remain cautious

Bulls and bears jostle early Monday as geopolitics flash mixed messages and the economic calendar remains light.

That said, Iran’s likely intervention in the Israel-Hamas war contrasts with a 5-hour ceasefire at the Gaza Strip to placate the war fears. Adding strength to the cautious optimism is the PBOC Governor’s readiness for more stimulus.

However, hawkish talks of the major central bankers at the IMF meeting in Morocco and the US Dollar’s hesitance to decline to test the optimists.

New Zealand’s general elections resulted in a new government and allowed the NZDUSD to rebound from the monthly low, which in turn joined China News to also help the AUDUSD.

The Gold Price fails to cheer the US Dollar’s retreat while crude oil edges higher after rising heavily the previous day. Further, stocks in the Asia-Pacific zone print mild gains while tracing the US stock futures, despite Friday’s mixed Wall Street performance.

BTCUSD and ETHUSD ignore a $1.8 million worth of Bitcoin and Ethereum theft and rally after a two-week downtrend as optimism about the ETF grows.

Following are the latest moves of the key assets:

  • Brent oil retreats after rising the most since April, down 0.30% intraday near $91.00 by the press time.
  • Gold price reverses from 200-day SMA after snapping two-week downtrend in the last, down 1.0% near $1,910 as we write.
  • USD Index prints the first daily loss in three with 0.20% intraday loss near 106.50 at the latest.
  • Wall Street closed mixed but the Asia-Pacific stocks edged higher. However, equities in Europe and the UK trade mixed at the latest.
  • BTCUSD and ETHUSD print the biggest daily gains in a fortnight and a week respectively, around $27,900 and $1,580 as we write.
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Market remains dicey

Although the riskier assets are printing mild gains of late, it wouldn’t be wise to confirm the risk-on mood as geopolitical woes join the central bankers’ hawkish comments and economic fears about China, Europe and the UK.

Iran's Foreign Minister said during the weekend that the nation won’t remain an observer if Israel’s war continues in Gaza and destroys Iranian properties. Also challenging the sentiment are talks among US and Israeli officials about the possibility of US President Joe Biden’s visit to Israel soon. With this, fears of the Israel-Iran war remain on the table and underpin the haven demand especially when the US Dollar lacks upside momentum and China suggests more stimulus. Alternatively, news suggesting a 5-hour ceasefire to allow foreigners to exit and humanitarian aid to enter Gaza via the Egypt border appears to favor the sentiment. Further favoring the mood is People’s Bank of China Governor Pan Gongsheng’s pledge to provide more substantial support to the real economy during the IMF showdown.

It should be noted, however, that multiple central bankers spoke at the International Monetary Fund (IMF) meeting in Morocco during the weekend and the majority of them tried to defend the respective monetary policies and hence suggested the “higher for longer” rates. That said, European Central Bank (ECB) President Christine Lagarde said that the underlying inflation in the eurozone is still strong and wage growth is “historically high” whereas Bank of England (BoE) Governor Andrew Bailey mentioned that pay growth has not yet responded to the BoE's interest rate hikes.

On Friday, the disappointing US consumer sentiment numbers and an absence of major hawkish statements from the Fed officials prod the US Dollar buyers amid a pullback in the yields. The same joins the hopes of witnessing a sooner end to the Fed’s rate hike cycle to challenge the US Dollar bulls. Even so, the comparatively firmer US fundamentals and doubts about China’s economic conditions, as well as the overall firmer US Treasury bond yields, keep favoring the US Dollar buyers despite the latest retreat.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

Second-tier data/events may entertain traders

Although an absence of the key factor joined mixed mood to underpin demand for the riskier assets earlier in the day, the US NY Empire State Manufacturing Index, Bank of Canada Business Outlook Survey and speeches from multiple central bankers can entertain momentum traders during the rest of the day. It should be noted that the US Retail Sales and Fed Chair Powell’s speech are this week’s top-tier catalysts from the US which need close observation after last week’s heavy jump in Gold and Crude oil.

May the trading luck be with you!