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NZD/USD Bounces As RSI Returns From Oversold Territory, But Risk Reversals Drop

NZD

The kiwi found poise amid a recovery in risk assets Wednesday, as the Bank of England came to the rescue of the gilt market and announced unlimited purchases of long-dated bonds. The PBOC tuned up its jawboning against yuan weakness, which inspired USD/CNH to ease off record highs and may have had knock-on effects on Antipodean FX.

  • NZD/USD returned above the $0.5700 mark the day after it charted a gravestone Doji candlestick and snapped a six-day losing streak, a sign that selling pressure was losing steam. The RSI recovered from oversold territory (last sits just above the 30 threshold), which constitutes a bullish signal.
  • Risk recovery was broad-based, with benchmark stock indices rallying post-Asia and the BBG Commodity Index adding 2.1% come the end of the day. There was little in the way of domestic catalysts to explain the kiwi's relative outperformers versus its G10 peers.
  • NZD/USD risk reversals moved out of sync with the spot rate, posting significant drops across the curve. One-year skews turned most bearish since May 2020.
  • Spot NZD/USD last deals at $0.5725, down 5 pips on the day. Bulls look for gains towards the $0.6000 mark, while bears keep an eye on yesterday's cycle low of $0.5565.
  • The ANZBO survey headlines the domestic docket today, with ANZ-Roy Morgan Consumer Confidence, building permits and RBNZ Gov Orr's speech coming up tomorrow.
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