• NZ dollar hovers somewhat below its break-even line being one of the weakest currency in G10 though as PMI disappoints
  • US House passes a spending bill to avert a shutdown, now it’s the Senate’s turn
  • Wall Street ends the session lower as shutdown-related risks weigh on

Despite a rise of the US 10Y yield well past 2.6% on Thursday, the US dollar was unable to benefit from it. As a result, the EURUSD is still trading much above 1.2250 at the time of writing being the feeblest currency in the whole G10 basket. Along with the USD the NZ dollar is also falling in early trading, however losses have not been severe thus far.

link do file download linkThe NZD moves subtly lower after the disappointing PMI reading. Source: Macrobond, XTB Research

It could be a ramification of manufacturing PMI which unexpectedly slipped substantially in December. The reading showed 51.2 against the prior value at 57.7 and even it remained above the level dividing economic expansion from contraction it was a five year low. While all of the subindexes dropped the largest one was seen in new orders plunging from 57.3 to as low as 50.2. There were comments that companies are awaiting “greater clarity and, more importantly, understanding of likely policy shifts”.

link do file download linkA technical view suggests the NZ dollar might be susceptible to a pullback, however it could take some time before bears take control. Notice that the ongoing upward move might face a more notable obstacle at around 0.7380 where an important supply zone might be localized. Needless to say that the stronger USD is needed to see the pair declining but it could be an impossible scenario until the US Senate passes a spending bill. Source: xStation5

Let us recall that a showdown when it comes to a US government shutdown has just begun. The Congress needs to pass a spending bill in order to avert a shutdown and prolong the ongoing financing through 16 February. While the House already passed a bill on Thursday the Senate held off on voting till today. Moreover, Senate Democrats said they have the votes to block the measure in a bid to force Republicans and President Donald Trump to include protection for young immigration. Let’s point that as much as 10 out of 18 Democrats who voted for a stopgap bill in December have publicly announced their opposition, hence it could hamper the Senate to pass the House bill. Finally let’s pin down that the House passed a funding bill by 230-197 while current funding runs out at midnight Friday. Having said that, one needs to underline that even as the Senate fails to pass a bill the history suggests that it could have subtle repercussions to the US dollar.

As shutdown-related risks prevailed on Thursday the major US indices ended the day lower retreating from their highs made a day before. Taking a look at the SP500 chart (US500) one may spot the price has already failed to break a local resistance twice, thus a possible pullback might be possible. Let us indicate that losses were heaviest in the industrial and energy sectors and a sell-off accelerated once the housing data and the Philadelphia FED business outlook index were released. The slump was alleviated by the lowest reading of jobless claims since February 1973, albeit all in all the benchmarks slid at the close.

link do file download linkThe US500 might be heading lower toward the nearest support placed at 2770 points as the price did not break a resistance twice while risks regarding a possible government shutdown might weigh on the near-term. Source: xStation5