The New Zealand dollar continues to see a lot of noise as we look weak on Tuesday. At this point, the market continues to see a lot of questions about risk appetite.
NZD/CAD
The New Zealand dollar has fallen a bit against the Canadian dollar during trading on Tuesday, breaking below the 0.81 level and showing a fairly clean relative strength move here around the Forex world.
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The Canadian dollar has done fairly well, and the New Zealand dollar is falling pretty much everywhere else as well as here. This is a market that is likely to continue to see a lot of questions asked about momentum. With this, the markets continue to see a question of whether or not it will be about safety, or whether it is about Asia.
The biggest driver is divergence between the two commodity currencies. Canadian dollar support is mainly driven by Brent Crude, as Middle East supply risks intensify.
That's helping the Canadian dollar despite the broader risk-off environment. The Bank of Canada held rates at 2.25% last week but delivered a distinctly more hawkish message.
Governor Macklem said multiple hikes are possible if inflation remains elevated, and markets have pulled forward expectations for tightening.
The New Zealand dollar is being pressured by deterioration in risk appetite, as the US dollar has strengthened against the New Zealand dollar due to those Middle East tensions. It has a bit of a knock-on effect around the world.
Chinese trade data was somewhat strong, but it was more or less superficial. Imports undershot expectations, raising questions about Chinese demand. That's relevant because China remains New Zealand's largest trading partner.
Ultimately, it looks like the 0.8050 level is support, and then the 0.80 level has even more support underneath there.
To the upside, the 0.8150 level continues to be a bit of resistance.
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