NZD/USD nears fresh four-month top amid global dairy optimism, fading trade war fears

• NZD/USD seesaws around fresh four-month high as USD weakness joins upbeat catalyst at home.
• US President Donald Trump took a U-turn on trade talks with China, Fonterra cited global dairy optimism.
• RBNZ’s capital decision, trade headlines and the US data will be in the spotlight.

NZD/USD takes rounds to 0.6530 at the start of Thursday’s Asian session. That said, the kiwi pair surged the fresh high of 0.6541 during the later part of Wednesday.

While optimism surrounding the New Zealand economy, a contrast to the United States (US), has recently pleased the buyers, the previous day’s four-month low ADP Employment Change and downbeat service activity numbers from the US added strength to the pair’s rise. Also supporting the Bulls is the news that Global Dairy giant Fonterra raised its farm-gate milk price while saying that the global dairy market is in favor of demand.

Providing an additional boost to the run-up was the US President Donald Trump’s U-turn on trade talk proceedings with China. The Republican leader recently surprised markets while saying that the trade talks with China are now going “very well”. Markets attribute this sudden change to China’s threat of taking harsh measures if the US enacts a bill on how China treats its Uighur Muslim community.

Moving on, a lack of data at home could restrict the pair’s momentum ahead of the Reserve Bank of New Zealand’s (RBNZ) capital decision, at 12:00 PM in New Zealand. The central bank is up for conveying capital ratio requirements while proposing Tier 1 capital ratios to 16% of risk-weighted assets, against Governor Adrian Orr’s favor for no change, as per the Reuters.  While the immediate impact on the New Zealand dollar (NZD) could be minimal considering no change expectations, a surprise hike will not only provide negative impact to the domestic currency but will also hurt the Australian banks at home and indirectly damage the Australian fundamentals.

On the other hand, weekly Jobless Claims, Trade Balance and Factory Orders from the US will decorate the economic calendar together with comments from the Federal Reserve (Fed) Governor Randal Quarles.

Technical Analysis

200-day Simple Moving Average (SMA) near 0.6545 still stays unhurt and could act as the key resistance holding the gate for August highs surrounding 0.6590. Meanwhile, a downside break of 0.6500, including top marked on August 09, could trigger fresh pullback towards November month top close to 0.6465.