Forex Market: NZD/USD retreats from six-week highs as early US election results reveal tight race

NZD/USD, along with other risk-sensitive assets, retreated sharply on Wednesday, as early results from the US presidential election revealed a tight race while market players were prompted to wind back bets on Biden victory.

Donald Trump was having a lead in key states such as Florida and Ohio, while investors were expecting to see if he would be able to keep positions in Rust Belt states (Michigan, Wisconsin and Pennsylvania), which ensured his victory in 2016.

The rising likelihood that Trump may be re-elected mounted pressure on trade-sensitive currencies.

Still, markets seemed to have begun to accept the possibility that the official results from the election may not become known on Wednesday.

“I don’t think markets at this point are pricing in a victory of Trump or Biden. We just have to wait for the results,” Kyosuke Suzuki, director of Forex at Societe Generale in Tokyo, said.

“One of the few things clear so far is that we are not going to see a Democrat landslide win as polls had suggested. That has wrong-footed an FX market which was positioned for some clarity,” Chris Turner, ING’s global head of markets, told Reuters.

The US Dollar hit a one-week low against major peers on Tuesday due to expectations of a Biden win and “we are now seeing an unwind of that,” according to Fidelity International’s Salman Ahmed.

President Donald Trump falsely claimed victory in the election, but however, millions of votes still remain uncounted.

As of 8:58 GMT on Wednesday NZD/USD was retreating 0.55% to trade at 0.6632, after earlier touching an intraday high at 0.6744, or a level not seen since September 21st (0.6778). The pair has trimmed gains to 0.32% so far in November, following a mere 0.03% dip in October.

On today’s macroeconomic front, ADP is to report on US private sector employment change for October at 13:15 GMT.

Market players will be also expecting the monthly report on US balance of trade for September due out at 13:30 GMT as well as the October data on US services sector activity by the ISM due out at 15:00 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 4.7 basis points (0.047%) as of 7:15 GMT on Wednesday, down from 6.3 basis points on November 3rd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6669
R1 – 0.6717
R2 – 0.6766
R3 – 0.6813
R4 – 0.6861

S1 – 0.6621
S2 – 0.6573
S3 – 0.6524
S4 – 0.6476