The high flying kiwi dollar has hit a bit of a bump after the recent Reserve Bank of Australia cut sent markets into a spin. Regardless of this though the real trouble has only just hit as the NZ unemployment rate lifted from 5.4% to 5.7% - a very strong jump. This overall seems like quite a bearish move after an unemployment rises but the NZ economy has seen the opposite effect in the short term as participation rate has increased from 68.4% to 68.6%, leading to many traders to view the NZ economy in a more positive light. Regardless of the lift in the participation rate the pressure will now be on the RBNZ to act in a more positive manner and even look to cut interest rates further in an effort to boost the economy. I would not be surprised to see Graeme Wheeler come out earlier and even try and jaw bone the currency in an effort to provide some relief at the least.
On the charts the NZDUSD took a beating yesterday on the back of the RBA announcement to cut rates. However, this now looks mostly priced in and the NZDUSD has looked to rally back in an effort to make up for the previous ground lost. Chart wise resistance is looking very strong at 0.6961 and I would expect this key level to hold out in the short term, unless we see a strong bout of economic data in the foreseeable future. For lower levels support 0.6893 and 0.6838 is looking the ideal levels for any markets traders on a bearish trend.
The recent political change in the US and the advent of Donald Trump being elected has created an unstable and volatile environment when it comes to political speculation. While at the same time a drop in commodity prices and commodity currencies has seen strong rallies in the USD. And while the bulls are enjoying this brief moment it's worth being somewhat concerned about what the future might hold for traders amid the chaos of the US voting system. Certainly after the presidential elections start taking place we could see strong volatility across the board.
For the markets one of the main players for a strong USD is Oil as it continues to find weakness on the back of the stronger USD. A crash through support at 43.98 has lead to some sharp selling, but oil is lacking momentum in the read up to the current oil inventory data which is due out tomorrow, and many are expecting a reading around 1.22M barrels. This still shows a surplus but a much weaker at the end of the day and the markets could view this positively if that's the case.
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