The kiwi has been assaulted by bears amidst a risk-off tone in the market and following the release of softer than expected business confidence data. Investor sentiment took a turn for the worst at the beginning of the Asia session due to news out of China that Beijing will stop directly buying up shares to shore-up equity markets and it hasn’t really recovered. Major equity markets in the region are in the red across the board, with the ASX 200 and Nikkei 225 down around 1.6% and 1.7% respectively; the latter is also feeling the sting of a stronger yen.
ANZ’s New Zealand Business Confidence Index dropped to -29.1 in August, from -15.3 in the prior month. This is lowest the index has been since mid-2009 when it was nervously recovering after the GFC. Businesses in NZ are clearly feeling the weight of falling commodity prices and lacklustre levels of global demand, as well as a softening domestic economy.
NZDUSD dropped on the back of today’s figures and is now testing an all-important support zone around 0.6400/10. A confirmed break here could put the pair on the defensive in the lead-up to this month’s US NFP numbers, due out on Friday. However, price action is looking a little oversold after last week’s extreme volatility, thus we can’t rule out a test of resistance around 0.6500 in the near-term.