NZD/USD: a period of consolidation is expected ahead of nonfarm payrolls

• NZD/USD is slightly bid in early Asia with the pair stabilising in the 0.6780's.
• There has not been a great deal that the markets have been paying attention to and instead, there is an air of caution around trade arrangements between the US and China and indeed NAFTA. 

The FOMC was as expected, a non-event with only a couple of tweaks in the statement characterizing economic activity as strong, and remains on track to raise rates again in September.

Analysts at TD Securities explained that with the FOMC meeting was a non-event and the markets were more focused on the refunding announcement August Refunding: Coupons Rise Again - TDS (which brought the announcement of a 2m bill and more 5yr coupon supply).

meanwhile, analysts at ANZ explained that while there were a few things going on overnight (including a ‘steady as she goes’ FOMC statement), the kiwi was pressured lower by ongoing tensions regarding the global trade backdrop and some softer PMIs. "However, moves were contained to recent ranges, and we suspect that will remain the case again today."

While the data has not been particularly pretty outside of the ADP report in the US today, the US July ISM manufacturing index that missed expectations on the headline, coming in at  58.1 vs 59.4 expected, held a positive employment aspect of the report and this did beat expectations, arriving at 56.5 vs 56.0 prior. Also worth nothing from the ADP report, it was the best reading since March and a solid prelude for nonfarm payrolls on Friday where nearly every industry posted strong gains and small business hiring picked up. 

Risk-off trade could hurt the Kiwi

Trump has directed US Treasury's Lighthizer to consider increasing the tariff rate on $200 billion of Chinese goods to 25 pct from 10 pct and the market should be on guard for such a move that would trigger a risk-off environment which would likely hurt the antipodeans as traded as a proxy to anything China-related. 

NZD/USD levels

The 10 and 21-D SMAs are so far holding up but a follow-through opens 0.6720 and then 0.6680. On the upside, resistance remains located at 0.6860.  A break of 0.6920, the June highs, will come into focus on a follow through beyond 0.6860. The 200-month moving average resistance is at 0.7009. However, a period of consolidation is likely ahead of nonfarm payrolls and RSI is neutral on the daily sticks.