US politics cast shadow over NZD

September 27, 2016

It's been an interesting start to the week as politics is looking likely to take centre stage amongst a market which is becoming increasingly worried over the result of the US presidential election. Obviously this has a flow on effect for the USD, and many pundits are starting to worry that a swing in the polls for Trump could cause a sell-off in the USD, as investors look for safe havens around worries that we could see negative economic policy for the US. The politics at hand certainly have had a big impact on the USD and have so far dragged attention away from the FED and it's hawkish talk that it has put on to bolster the USD.

Regardless of the FED movements and politics, early in the week the focus switched to the NZD as it looked to be a case of bad news for the New Zealand economy as exports shrank to 3.39B (3.58B exp) and the New Zealand trade balance slipped to -1265M (-751M exp). This will put pressure on the Reserve Bank of New Zealand as it's a keen watcher and commentator of the balance of payments for New Zealand. However, at the same time the recent economic news has been relatively upbeat and an interest rate cut may not be the answer in the short term to help the economy. At present the strong NZD is what is hurting exports and preventing a stronger recovery, so it could end up being a case of the NZD looking to be jawboned by the RBNZ if they have their way.

On the charts the NZDUSD has so far managed to climb back up after some sharp selling at the end of last week. The recent push through the 50 day moving average was a strong bearish signal but the recovery today comes on the back of a weaker USD and in reality little has changed for the NZD on the whole. The push higher though was hit with some serious resistance at 0.7287 and it's likely this level will look to hold out against the bulls in the short term at the very least, unless of course we see further selling of the USD in the wake of recent political events. If the bears do take hold then I would expect support to be pushed on and the next levels down can be found at 0.7221 and 0.7180, which are likely to be the main targets.

Lastly, the pound continues to struggle to find any sort of real momentum in the current market climate, and I would expect this to continue as it looks to find a way to push through strong support at 1.2939. Traders have been very apprehensive to have any sort of bullish run, and a push lower looks more on the cards, but it's a case of the market holding back until it gain a clearer picture of the upcoming presidential elections and how polls are moving.  

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