Asia Pacific Market Open Talking Points
- S&P 500 pauses ascent as pro-risk New Zealand Dollar weakens
- About $360b in US tariffs on China to remain after interim deal?
- NZD/USD eyeing downside breakout on bearish sentiment signal
S&P 500 Momentum Fades, NZD/USD Falls Ahead of US-China Trade Deal Signing
Upside momentum in the S&P 500 and pro-risk New Zealand Dollar faded ahead of Wednesday’s highly-anticipated US-China “phase one” trade deal signing. There, the former is anticipated to cut existing tariffs by 15% on about $120b of goods from the latter. For this, China is expected to purchase more agricultural goods from the US such as pork and soybeans while working on improving intellectual property rights.
Reports crossed the wires from a U.S. official that current existing tariffs against China would stay in place until after this year’s presidential election. It was also denied that there is a plan to reduce duties further. That would mean a total of about $360b worth of imports from the latter remaining under levies. These comments also fall in line with recent rhetoric from President Trump regarding a possible timetable.
The focus on trade wars arguably dulled some of the impact economic data from the US and earnings report had on equities. Headline local inflation clocked in at 2.3% y/y in December versus 2.4% expected. This is as major banks reported mixed results from Q4 2019. Overall, volatility in the forex majors spectrum was relatively muted which is understandable ahead of key event risk.
Wednesday’s Asia Pacific Trading Session
This translated into a mixed session on Wall Street as the S&P 500 closed -0.15% while the Dow Jones finished at +0.11%. With that in mind, Asia Pacific equities may see an overall tepid Wednesday. Within the ASEAN realm, Indonesian trade data will cross the wires at 4:00 GMT. But the focus for USD/IDR arguably remains on risk trends and sentiment.
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New Zealand Dollar Technical Analysis
On a daily chart, NZD/USD is aiming to take out near-term rising support from November – blue line on the chart below. A confirmatory downside close would open the door to reversing the key uptrend. Though prices remain above former descending resistance from March 2019, keeping the medium-term bias higher. Sentiment signals seem to support the downside outlook via IG Client Sentiment at the time of this writing.
( 01:01 GMT )
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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
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