NZD steadies after Friday plunge

The New Zealand dollar is trading quietly at the start of the week. NZD/USD is currently trading at 0.7005, up 0.01% on the day.

New Zealand dollar slides on contagion fears

The New Zealand dollar continues to be racked by strong volatility, as investors anxiously monitor the Evergrande crisis. The Chinese property giant failed to make a USD 85.0 million coupon payment last week, and another USD 47.5 million payment is due this week. The markets shrugged off the missed payment, and NZD/USD jumped 0.96% on Thursday. However, almost all of these gains were lost on Friday, after reports that Evergrande’s Electric Vehicle subsidiary had severe liquidity problems. The kiwi has settled down for now, but the roller-coaster ride could continue, based on new developments in the Evergrande saga. Chinese authorities are unlikely to bail out the company, but if they take measures to prevent contagion, stability in the markets will be preserved.

It’s a light calendar week for New Zealand data, which means that Chinese and US events could have a magnified impact on the movement of the New Zealand dollar this week. This includes US GDP and the Core PCE Price Index, which is the preferred inflation indicator for the Federal Reserve.

The Federal Reserve is never far away from the spotlight, especially with the Fed broadly hinting that it will begin tapering shortly, likely at the December meeting. Fed Chair Jerome Powell has two speaking engagements this week, and the markets will be listening closely, looking for any insights about a timeline for a taper. Powell will testify before Congress about Covid and the CARES Act on Tuesday and will speak at an ECB forum on Wednesday. Given that this week is a somewhat light data calendar, these events could be market-movers for the US dollar.

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NZD/USD Technical

• The next resistance line is at 0.7077. This is followed by resistance at 0.7141
• There are support lines at 0.6966 and 0.6919

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