Forex Market: NZD/USD hits a two-week low as broad risk sentiment cools ahead of US stimulus deal deadline

New Zealand Dollar retreated along with its Australian counterpart on Tuesday, while hitting a two-week low against the greenback, as investor risk sentiment cooled ahead of a Tuesday deadline for a deal on a US coronavirus relief package.

At the same time, the minutes from the Reserve Bank of Australia’s latest policy meeting showed board members had discussed a rate cut and purchases of longer-term debt to support the economy and curb AUD appreciation.

Market players remained wary about prospects of a US fiscal stimulus deal. US House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin “continued to narrow their differences” in a Monday conversation, according to Pelosi’s spokesperson.

The House Speaker hopes that by the end of Tuesday it will become clear if a coronavirus stimulus bill can be agreed on before the presidential election, the person said.

“Although Pelosi has set a Tuesday deadline for a deal, it does not seem like she has a clear conviction that there will be an agreement,” Shinichiro Kadota, senior strategist at Barclays, was quoted as saying by Reuters. “Markets probably still think a deal before the election is unlikely.”

As of 7:31 GMT on Tuesday NZD/USD was retreating 0.56% to trade at 0.6568, after earlier touching an intraday low of 0.6563, or a level not seen since October 8th (0.6547). The pair has dropped 0.64% so far in October, following a 1.80% slump in September, its first monthly loss since March.

On today’s economic calendar, market players will be expecting the monthly report on US housing starts for September due out at 12:30 GMT.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 4.9 basis points (0.049%) as of 6:15 GMT on Tuesday, down from 5.7 basis points on October 19th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6617
R1 – 0.6634
R2 – 0.6663
R3 – 0.6679
R4 – 0.6695

S1 – 0.6588
S2 – 0.6572
S3 – 0.6543
S4 – 0.6514