NZD/USD seesaws around 0.6600, offers a mild reaction to New Zealand election results

• NZD/USD begins the week’s trading with an upside gap beyond 0.6600.
• Jacinda Ardern secured an emphatic victory in general elections by securing 49.1% votes.
• China passed a law to restrict controlled exports, US stimulus deadlock, virus woes continue.
• Risk catalysts can keep the driver’s seat despite the important China data dump.

NZD/USD struggles to keep the week-start uptick of 0.6612, while also keeping the 0.6600 threshold, as Monday’s trading begins. The pair’s initial rise of 13 pips from Friday’s close could be attributed to Jacinda Ardern’s status-quo in New Zealand’s general elections. However, challenges to the market’s risk sentiment probe the bulls despite Friday’s moderate environment, mainly due to upbeat US data and stimulus hopes.

Labour gains parliamentary majority, Ardern stays as PM…

With early results projecting Labour to have 64 out of 120 seats in New Zealand’s Parliament, the rare outright majority speaks louder of Jacinda Ardern’s popularity. While the ruling party is likely to keep their alliance with the Greens, PM Ardern will have a free hand to push the kiwi towards Pacific leadership. During her first speech, the winner signaled to form a government in 2-3 weeks while citing a little interest in keeping Greens in all the positions as they previously were. Although the result favors a bright future for the New Zealand dollar (NZD), bearish RBNZ and risk-off mood probes the NZD/USD buyers.

Read: New Zealand election: Jacinda Ardern's Labour Party scores landslide win

Among the many indicators that question market optimism, failures of the US Congress to provide the much-awaited coronavirus (COVID-19) relief package gain major attention. While US President Donald Trump’s recent easing of government strings have raised hopes of a stimulus outcome, the Democrats’ deadline to have an agreement by Tuesday makes the case serious.

Elsewhere, rising COVID-19 numbers in Europe, coupled with brakes in leading vaccine trials, threaten traders of much economic hardship ahead. Further, China’s tussle with the US, the UK and Australia also becomes a worrisome point for NZD/USD bulls. Having recently banned some Aussie items and warned America over its alliance with Taiwan, Beijing announced the law to limit controlled exports to shrug off the global wave of limiting items from the Asian major.

On the data side, US economics have been mixed while those from New Zealand have also signaled RBNZ’s need for intervention. Friday’s US Retail Sales and Michigan Consumer Sentiment helped the market to recover some of the losses. New Zealand’s September month Business NZ PSI grew from upwardly revised 47.2 to 50.3 in its release on Monday.

Moving on, China’s September month Industrial Production and Retail Sales will accompany the third quarter (Q3) GDP to entertain Asian traders. Upbeat forecasts are likely to favor the Antipodeans if risk factors allow.

Technical analysis

Repeated bounces off 100-day SMA, currently around 0.6585, coupled with mildly positive MACD on the daily chart, favor the bulls to remain hopeful unless breaking an ascending trend line from June 30, at 0.6545 now.