US stock indices added slightly on Tuesday. On the other hand, Asian stock exchanges are trading in the green zone on Wednesday morning. The main reason is the reduction of concerns about the speed of spread of coronavirus. At the same time, oil rises in price by almost 2% while gold is slightly weakening, which generally indicates a decrease in anti-risk sentiment.
The expected speech by Fed Chairman J. Powell in Congress did not contain anything that could increase volatility. In particular, Powell noted that the FOMC assumes that the current monetary policy supports economic growth, a strong labor market and inflation, and as long as the incoming information is consistent with FOMC forecasts, there is no need to change the policy.
Meanwhile, the NFIB small business survey shows a significant increase in business optimism in January to 104.3p, which is higher than forecasts and above the level of December 102.7p. At the same time, the state of the labor market raises more and more questions. Earlier, we noted that the ISM report contained data on a strong slowdown in the labor market in January, while ADP and BLS (non-farms) claimed strong growth.
Here is another report. JOLTS reports that the number of vacancies decreased in December by 364 thousand, which, taking into account a decrease of 574 thousand a month earlier, gives a record drop of 938 thousand in the last two months of 2019.
If different methods of evaluating the same labor market give directly opposite results, then what is the price of these methods?
As for the COVID-19 epidemic, everything is not clear with it. Markets are recovering on reports of a slowdown in the growth rate of new cases, but they ignore the report of the Chinese Health Commission, which no longer takes statistics into account with patients with a positive virus test, but without disease symptoms.
These considerations support the short-term growth of optimism, but do not allow forming a long-term positive outlook; a reversal to the next wave of sales can occur at any moment.
NZD/USD
As expected, the RBNZ left the current interest rate at 1% based on the results of the meeting that ended today, noting that "the monetary policy has time to adjust if necessary," taking into account the negative consequences of COVID-19.
The forecast for the rate has been revised upwards and reductions are not expected in the foreseeable future, but the endpoint is already higher.
The forecast on the rate gives the kiwi a definite advantage, primarily against AUD, but is unlikely to lead to long-term consequences.
The first reaction of the market to the results of the RBNZ meeting was positive. NZD/USD increased, but failed to update the local maximum of 0.6502. The conclusion for the kiwi is disappointing - it still has no internal incentives for growth and will be under pressure as long as there is a threat of the spread of the epidemic and the associated slowdown in the Chinese economy.
Moreover, Kiwi will try to find support at 0.6447 and try to get to 0.6502 once again, but in case of failure, the most likely scenario is to go to the side range.
AUD/USD
Based on its own forecasts, RBA does not see the need for further rate cuts, which in theory, should support AUD, since even 0.75% is still slightly higher than the average G10 rate. At the same time, the market as a whole assesses the position of the RBA as overly optimistic. In particular, the NAB bank notes that private consumption remains at very low levels, and therefore, expectations for 4Q GDP growth are unlikely to be met.
NAB does not also observe any positive dynamics in the business environment, wholesale and retail trade at historically low levels, companies do not see signs of approaching sustainable growth so far.
In addition, Friday's CFTC report showed a speculative increase of more than $ 1 billion to a net short of Australian currency and thus, there are no internal reasons for the reversal.
The support of 0.6658, which was formed on February 10, is unstable. The current corrective growth is based on a decrease in panic and a general increase in confidence in global markets. Meanwhile, the resistance zone of 0.6755 / 70 is most likely to stand. If you approach it, you can try to sell with the target of 0.6610 and stop just above the resistance zone.