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Market Update
The New Zealand dollar is the top performing currency against the greenback this morning after the fourth-quarter New Zealand employment job report came in much stronger than expected. The NZDUSD pair is currently trading around +0.30 percent higher intraday and is on course for second day of strong gains.
According to Q4 data from the New Zealand economy the official unemployment rate shrunk to 4.9%, marking a major consensus beat, as most economists were expecting Q4 unemployment to be as high as 5.6%.
One of the big reasons why the New Zealand dollar rallied was the fact that the rate market is no longer pricing in any rate cuts from the Reserve Bank of New Zealand this year after today’s unemployment number. Additionally, an announcement that Pfizer had received preliminary approval for its vaccine to be rolled out in New Zealand helped lift the New Zealand dollar.
Keeping with the theme of antipodean currencies, the AUDUSD pair has recovered some of yesterday’s losses, and has largely followed the NZDUSD pair higher. ANZ bank has put out a note this morning saying that the Reserve Bank of Australia will cut rates again this year.
With the potential divergence or coming rate disparity taking place between the RBA and the RBNZD central banks the AUDNZD pair is under pressure and is suffering its largest two-day decline since November 2020.
Another interesting trade right now is the USDCAD pair. The US private oil survey reported an unexpected oil draw and sent the price of WTI surging towards the $55.00 level. With oil continuing to break to the upside the USDCAD pair remains vulnerable to further losses.
WTI crude oil has now broken above the February 2020 swing high, placing the $57.50 level firmly in bulls sight. The momentum behind Brent oil is also strong and I would not be surprised to see the $60.00 level tested sooner rather than later.
Yesterday’s major move in the US dollar index started to falter after bulls failed to breach dual resistance around the 91.25 level. The EURUSD and GBPUSD pairs have firmed this morning as traders await the next big move in the greenback.
The USDJPY pair has been hovering around the 105.00 handle as the risk-sensitive pair awaits the next major move in the US dollar. Bank of Japan Deputy Governor Wakatabe has been on the wires this morning talking down any chances of policy changes from the central bank.
US indices finished the day well into the green, as Reddit trades continued to show signs of unwinding. Both silver and GameStop posted massive bearish daily reversal candle, which helped sentiment on Wall Street.
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The economic calendar is notable light during the European trading session. The release of eurozone January CPI data is not expected to move markets, although year-on-year EU CPI and Core year-on-year CPI is tipped to show a strong pick-up.
ADP private sector employment data from the US economy from the month of January is set to be the big market mover during the US session. Economists are expecting a +45,000 private sector headline number, which is a marked improvement on last month.
Markets will pay close attention to this report, as it can be a leading indicator for the US Non-farm payrolls report, which is released this Friday. Expect the greenback to rally if the ADP report comes in hot.
Aside from the ADP report, the release of ISM and PMI services data from the United States economy is also expected today. EIA crude stock data is also one for oil traders to watch out for later today.
