New Zealand PMI bounces back, Kuroda wins another term in office


US dollar slides again in early trading, it seems to be set for the fifth daily decline in a row
Haruhiko Kuroda has been elected for another term in office as BoJ governor
Antipodean currencies grind higher, NZ supported by a bounce in manufacturing PMI
The US dollar might see its fifth consecutive daily decrease when we take a look at the broad Bloomberg Index. At the time of writing it’s losing momentum against all its major peers which could be partly justified by a recent streak of the sub-par macroeconomic data.

There were readings of retail sales and industrial output and both disappointed quite considerably. Of course, it could have been sparked by harsh winter, higher prices seen in January as well, however, before we get a confirmation (releases for February) there is always a grain of uncertainty. Do notice that the US dollar is trading lower despite a hefty increase in US yields (the 10y yield is trading slightly above 2.9% right now) suggesting short-term oversold of the greenback. Nevertheless, a quick move up and down which occurred in the aftermath of CPI and retail sales prints seem to suggest that investors prefer to sell peaks in the USD and it does not bode well in the longer-term.

Beyond the US dollar thread it’s worth mentioning that Haruhiko Kuroda has been nominated by the country’s government for his another term in office as BoJ governor. The decision was broadly expected and it could mean a continuation of ongoing loose monetary policy going forward. Along with Kuroda his two deputy governors Wakatabe and Amamiya were reappointed alike. The JPY seems to enjoy the verdict being simultaneously shored up by USD weakness. Taking a look at the USDJPY chart one may notice that the pair is set to experience its worst week since July 2016. 

The weekly chart illustrates the pair could see its worst week since July 2016. The nearest technical support could be found at around 104.10 but it does not look so strong compared to the round level at 100.
In terms of macroeconomic releases one needs to mention NZ manufacturing PMI which bounced back substantially in January. A release showed the index rising from 51.2 to 55.6 escaping from a dangerous area in the vicinity of 50 points dividing economic expansion from contraction. If the two remaining indicators bounce back as well it could help the NZ dollar rise going forward especially when we take account of the beleaguered greenback and quite the rosy outlook for global economic growth.

NZ manufacturing PMI jumped in the first month of 2018 suggesting that moods in the economy could have improved across the board. Source: Macrobond, XTB Research
A weekly time frame shows that the NZDUSD could be on the verge of breaking a key resistance. If it succeeds, an increase toward the top from July 2017 might be at hand. On the flip side, if the pair is unable to break above this level at the close today, it would imply a pullback at least toward a support at around 0.72.

The NZDUSD might break above a crucial resistance zone at the end of the day which could pave the way for subsequent rises.