TALKING POINTS:US DOLLAR, POWELL, INFLATION, FED, NZD/USD:Despite the markets’ dovish view on Powell’s testimony, the US Dollar stays firm. The Fed’s second day The chair could reveal underlying USD trend bias. Despite the RB’s support, the NZD/USD is currently in a decline. Headlines from New Zealand and the Federal Reserve On the first day of his semi-annual appearance before the US Congress, Fed Chair Jerome Powell walked a narrow line. As expected, the recent rise in inflation grabbed center stage. His carefully calibrated replies seemed to elicit a narrowly dovish lean from the markets, propelling gold prices up while front-end bond yields fell. The US Dollar weakened as well, but held up admirably given the circumstances. Against most of the Greenback’s G10 rivals, prices maintained comfortably within recent trading ranges, fluctuating near the year’s highs. In comparison to other Fed policy proxies, this appears to be unusually cautious. Today, as Mr Powell’s testimony begins, another test of the USD’s resiliency awaits. He will now go to the Senate after appearing before the House yesterday. Aside from the carbon-copy prepared remarks, the questioning session could produce a market-moving soundbite. The Chair will do everything possible to avoid this. Indeed, the Fed’s strategy appears to be a repeat of the 2013 “taper tantrum”: begin the careful preparations for stimulus withdrawal while progressively soothing nervous markets. A case in point is yesterday’s Congressional appearance in the aftermath of the historic FOMC meeting in June. With that in mind, it will be interesting to see how the US dollar fared under the pressure of another dovish Powell appearance. When market action and news flow appear to be at odds, the price is usually always correct. The fact that the market is avoiding a decisive breach down currently could indicate significant underlying strength. The weekly unemployment claims report is the first item on the agenda, and both initial and continuing claims are expected to decline. European stock futures are pointing cautiously lower, indicating a risk-off mindset, while bellwether S&P 500 index futures are pointing cautiously lower. The Yen, which is known for being a risk-averse currency, is outperforming its peers. TECHNICAL ANALYSIS OF NZD/USD – DOWNTREND HELD IN THE FACE OF CLASHING NEWS-FLOW Despite an unexpectedly hawkish move at the RBNZ and Mr Powell’s calming words, the New Zealand Dollar is struggling to gain traction against its US counterpart. The NZD/USD pair has been stuck in a slump since late May. Through 0.7138, there is a severe resistance obstacle. A daily closure above that level is almost certainly required to alleviate near-term selling pressure. The 0.6923-43 zone, marked by the late-March low, provides critical support. It’s possible that breaking over that barrier will lay the stage for a drop toward the 0.68 figure. TradingViewFX was used to construct the NZD/USD daily chart. RESOURCES FOR TRADING—- Ilya Spivak, DailyFX.com’s APAC Head Strategist, wrote this article. Use the comments area below to contact Ilya, or follow him on Twitter at @IlyaSpivak./n
Read More
