Morning report: NZD/USD muted on trade balance as APAC markets eye BOJ decision

Thursday’s Asia-Pacific outlook

Asia-Pacific markets look set for a mixed open as traders prepare for the Bank of Japan’s policy decision. US stocks rose overnight on Wall Street, with the tech-heavy Nasdaq-100 Index (NDX) rising 1.55% at the closing bell. The S&P 500’s ‘fear gauge’ VIX index fell to its lowest level since April, perhaps signaling that traders are confident that a market bottom was found back in June.

Bitcoin trimmed early gains after Tesla, the electric vehicle maker, revealed that it sold most of its Bitcoin holdings for fiat currency. The top US aluminum producer, Alcoa, beat estimates, but profits fell from the prior quarter due to weaker aluminum prices. Aluminum prices fell nearly 25% from April to June.

The US dollar rose on euro weakness after Italian Prime Minister Mario Draghi’s government fractured as three parties boycotted a confidence vote. The political turbulence is weighing on confidence when Europe requires more unity than ever amid an impending energy crisis. The next election will likely see Italy’s far-right parties strengthen, which could split Europe’s resolve against Russia. EUR/USD, meanwhile, faces a policy decision from the European Central Bank tonight. The euro may weaken if policymakers deliver a 25 basis-point rate hike.

The Bank of Japan will announce its interest rate decision a few hours before the ECB. Markets expect the BoJ to stand firm on its ultra-loose policy, but targets for inflation and economic growth are likely to see changes. USD/JPY may rise unless the BoJ throws a hawkish surprise, as it would likely force short trades to cover.

NZD/USD technical outlook

NZD/USD’s early-week momentum appears exhausted as prices struggle to climb above the 26-day Exponential moving Average (EMA). Traders made a failed intraday attempt, which saw prices briefly eclipse the 38.2% Fibonacci retracement. The Relative Strength Index (RSI) weakened just below the oscillator’s mid-point, highlighting the loss of momentum.

NZD/USD daily chart

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