Markets traded in different directions on Tuesday, European stock indices went into the green zone, while the Asia-Pacific countries closed lower relative to Monday. The positive was strengthened by the growth of the IMF forecasts, in particular, the average oil price in 2021 was raised by 3.3%, which gave impetus to the demand for risky assets, but there is still no reason to expect this surge of enthusiasm to be prolonged.

Meanwhile, the number of confirmed cases of COVID has already exceeded 100 million worldwide. This is a lot, given the unprecedented measures taken by the governments of the vast majority of countries. The further development of the situation directly depends on how successful the results of vaccination will be. There is still insufficient data on both the efficacy of vaccines and their safety, which does not allow the realization of either pessimistic or optimistic scenarios.

Most currencies will continue to trade in range as there is no reason for a sustained trend to form.

NZD/USD

The data on consumer inflation for the 4th quarter was significantly better than expected, showing a steady growth of 0.5% QoQ. It seems that only one quarter turned out to be a failure, the economy has adapted to the permanently imposed restrictions due to COVID, and demand remains stable.

The CFTC report for the kiwi is neutral, the net long position increased by only 76 million, to 1.138 billion, the advantage for the New Zealand dollar, but the target price is still directed downward, so the risks of a correction are still high.

In fact, the situation has not changed since last week, all the same risks of correction with a confident recovery of the New Zealand economy, which reduces the likelihood of a dovish reversal of the RBNZ, and if so, then the yield spread should not change in favor of the dollar. This, in turn, reduces the likelihood of a long-term bearish reversal.

The likelihood that the RBNZ will implement the decision announced in the midst of the pandemic to lower the rate below zero at its meeting in April is currently regarded as very low.

A deeper correction is still possible, so an upward breakout of the 0.7235 resistance may turn out to be false. A similar situation occurred in August-September, the target price went below the long-term average, but NZD/USD managed to stay in a sideways range, which gave strong grounds for renewed growth. Perhaps something similar will happen this time, in any case, we must proceed from the fact that fundamentally the kiwi, unlike the dollar, remains strong, and the correction is relevant only in the short term.

AUD/USD

The situation with the Australian dollar is even more confusing than its New Zealand counterpart. The net long position is only 374 million, while it decreased by 50 million over the reporting week, we can say that there is practically no advantage for either side. The target price is below the long-term average but is attempting to reverse up. There is no direction, and therefore the most likely scenario is continued trading in a sideways range.

The situation around the RBA also adds ambiguity. The six-month $100 billion quantitative easing program ends at the end of April. Accordingly, the RBA will need to give recommendations on its plans for quantitative easing, and this will most likely be done at a meeting in March, but March is still more than a month away.

The forecasts are conservative. For example, NAB expects the RBA to extend QE, and RBA Governor Philip Lowe will announce this in February. ANZ, which is also widely represented in the Australian banking sector, assumes that QE will be extended, but in smaller amounts (perhaps by 50 billion), and the RBA will refrain from any drastic steps until the situation becomes completely clear.

When the upper border of the range at 0.7780 / 90 is reached, sales with a stop above 0.7810 are justified, the lower border is 0.7640 / 50, where buying can resume. So far there are few reasons to exit the range.