NZD/USD: Muted reaction to dismal New Zealand Business Confidence

NZD/USD continues to trade in a sideways manner following the release of the dismal New Zealand business confidence data for August released by the Australia New Zealand (ANZ) bank 

Business Confidence has deteriorated 10 points to -42.4% in August from July’s -31.8. Meanwhile, Activity Outlook for August slipped by 8 points to -17%. The data suggests that the post-lockdown rebound has run its course and validates the Reserve Bank of New Zealand’s dovish stance. The central bank is expected to keep rates unchanged at 0.25% until March. However, it may boost or extend asset purchases to push down borrowing costs. 

That, alongside bearish divergence of the daily chart relative strength index, indicates scope for a notable pullback in the Kiwi dollar. 

Also, the US dollar’s sell-off looks to have run its course for now. The American currency is most oversold in 40 years, according to analysts at Morgan Stanley. The investment bank has ditched its short position in the US dollar and has turned tactically neutral. 

The greenback may find bids if the deadlock in Washington over an additional coronavirus support package and flaring Sino-US tensions weigh over the global equity markets. At press time, the futures tied to the S&P 500 are trading flat. #NZD/USD##FX#

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