Markets reacted positively to the news that Moderna's vaccine has shown high efficacy in clinical trials, and moreover, it looks better than the Pfizer/BioNTech one in several consumer qualities, since it requires less storage and transport conditions. At the same time, the reaction of the market was clearly more restrained compared to Pfizer and BioNTech last week.
On Monday morning, a belated CFTC report was released, which is interesting since it includes markets' reaction to the last US elections. Due to the strong reaction, all commodity currencies were sold, the New Zealand dollar was insignificantly bought, as well as the franc, and the yen in very large volumes. Despite the fact that the dollar's total position changed unnoticeably, the downward trend in the short position continued (weekly change +55 million, overall position -24.357 billion), which is also confirmed by a reduction in demand for raw materials, including gold and oil.
Overall, it should be noted that although the market already knew about Mr. Biden's advantage, they still reacted quite unexpectedly — buying up defensive assets and reducing raw materials. It is difficult for us to judge what kind of logic major players are guided by, but we should note that the cumulative positions in futures and options are currently in favor of the dollar and defensive assets and do not have the slightest signs of optimism from Biden's victory. Therefore, players do not see a positive scenario for the global economy at the moment.
The New Zealand dollar is the only conventional commodity currency, whose demand continues to grow. Weekly changes are by +56 million, accumulated long position by +527 million, and the dynamics in the stock and debt markets are also in its favor.
Last week, a positive tone was set at the RBNZ meeting, which, although it retained a dovish tone, still did not firmly confirm its intentions to cut the rate to -0.25% at the meeting in April. Now, the markets assume that the RBNZ will take longer to bring the rate to -0.25%, and if so, then the long-considered bearish factor may begin to recover in the opposite direction.
This revaluation is logical. If the RBNZ based its forecasts on a limited amount of data after the first wave of the pandemic, then now it is clear that housing construction, GDP and the labor market look more convincing than expected, and accordingly, the balance of risks has shifted to a more favorable side.
Technically, the NZD/USD pair reached a new 6-month high, rising above its previous peak at 0.6797, continuing its trend. This is followed by a strong resistance zone 0.6930/60, which is unlikely to be broken for the first time, but an attempt is possible. We assume further growth, as well as a possible pullback to the zone of 0.6750/80, which is logical to use for purchases with the goal at 0.6960.
The Australian dollar had weekly changes. According to the CFTC with a -541 million report, only the euro and the pound were strongly being sold. Thus, we have a negative trend.
Mr. Lowe, RBA's head, stated yesterday that the current main problem is not inflation, but the dynamics of the labor market. He emphasized that everyone already knows that the massive easing by a number of major Central banks has led to a" gravitational pull", that is, RBA's rate cut is required to prevent a strong flow of assets to Australia and not provoke growth to the AUD. Therefore, he indirectly acknowledged that the RBA is lowering the rate not because the economic situation requires it (as, for example, in the US), but because the Australian economy would have received strong external pressure.
From a technical viewpoint, the AUD/USD pair rose after the US elections, following the market movements, but, unlike the NZD, it failed to update the high, and so, the outlook looks more like a reversal than a new impulse formation after a correctional decline. Moreover, attempts to rise to the level of 0.7420 can be used to sell with the goal at 0.6970/90, followed by a breakdown and a stop above 0.7420 mark. This will provoke a global reversal in the markets in favor of risk demand.