The New Zealand dollar is down slightly at the start of the week, after falling sharply in the Friday session. NZD/USD is trading at the 0.68 line in European trade.
NZ dollar eyes Services PMI
We’ll get a look at New Zealand Services PMI later in the day. The services sector has been struggling, with the PMI indicating contraction since July 2021. The manufacturing sector is in much better shape, with last week’s data pointing to growth. The Manufacturing PMI rose to 53.6, up from 52.3, while Manufacturing Sales showed a strong rebound of 12% in Q4, after a 2.3% decline in Q3.
The markets remain significantly volatile, and risk sentiment has been weak, especially with the severe crisis in Ukraine. The fighting continues, although the markets did react positively to reports that the sides were making some progress towards a cease-fire. It’s difficult to know if Putin is interested in a cease-fire or is just playing games with his adversaries.
The New Zealand dollar is risk-sensitive but has done quite well despite the lack of risk appetite in the markets. NZD/USD posted five straight winning weeks, but its luck ran out last week, as the currency was down almost 1%. The New Zealand dollar has been supported by the surge in commodity prices but remains vulnerable to a rotation into the safe-haven US dollar. The Ukraine crisis has been the factor in the loss of risk appetite, and a cease-fire would boost risk appetite and likely boost the New Zealand dollar.
The US dollar rebounded on Friday, as investors preferred to avoid risk over the weekend. On Friday, the dollar index rose 0.60% to 99.12. The index has dipped to 99.02, in the middle of the range of 98.50 – 99.50. A break above 99.50 will would provide room for the US dollar to rise, while a fall below 98.50 would cloud the bullish outlook for the greenback.
- NZD/USD has weak support at 0.6764. Below, there is support at 0.6716
- There is resistance at 0.6845 and 0.6893
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