NZDUSD grounded ahead of NZ election
The lead up to tomorrow's general election in New Zealand has come about without the intrigue and controversy viewed in the lead up to next month’s U.S election.
Share this:
Polling suggests that sitting New Zealand Prime Minister Jacinda Arden will enjoy a landslide victory, buoyed by the country's successful elimination of the COVID-19 virus.
Much of New Zealand’s COVID-19 elimination success was a result of Arden’s decision to “go hard and going early” by implementing the toughest “level 4” lockdown restrictions seen anywhere in the world. With only 25 recorded coronavirus deaths to date, the policy has been deemed a success.
However, it’s not come without a cost. The New Zealand economy contracted by 12.2% in the second quarter of 2020, compared with a 7% fall in the Australian economy during the same period.
The New Zealand economy's path to recovery and job creation remains patchy. Borders are likely to remain closed to tourists and international students for the foreseeable future, crimping the tourism industry that pre the pandemic was the country’s largest export earner.
To offset this, the government has provided fiscal support with a focus on infrastructure projects. Elsewhere the Reserve Bank of New Zealand cut the overnight cash rate (OCR) to just 0.25% in March and committed to buying $100bn of bonds (QE) until June 2022.
The RBNZ has continued to canvass other unconventional monetary policy options to support the recovery including taking the OCR negative, lending to banks at a rate below market rates, and buying foreign bonds.
The threat of such policy options and general risk sentiment is likely to remain the key driver of the NZDUSD rather than tomorrow's election.
Technically, yesterday’s sell-off in the NZDUSD has resulted in a test of uptrend support at .6575 from the March .5469 low and this level needs to hold on a closing basis to keep the uptrend intact.
Keeping in mind, should the NZDUSD break and close below the aforementioned uptrend support it would warn that another corrective leg low has commenced with the potential to retest the September .6512 low, before .6400c.
Source Tradingview. The figures stated areas of the 16th of October 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Related tags:
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.