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Another wave of US Dollar (USD) strength post last week’s Non-Farm Payroll release has sent the Australian Dollar (AUD) lower, extending last week’s bear run from 0.6540 to around the 0.6300 zone in thin US Holiday trading. US equity market indices moved sharply lower in the wake of Friday’s NFP release, the data showing 263k jobs were added to the economy in September – better than expected while the Unemployment Rate unexpectedly improved from 3.7% to 3.5%. This data made the Fed more hawkish than they already were, reinforcing an argument for the Fed’s need to raise rates hard in order to fight inflation without taking the heat for pressure of a worsening job’s market. Markets predict the Fed to raise rates 75 points early November. Looking ahead we have US CPI y/y Friday which is predicted to come in lower from the current 8.3% at 8.1%. Further falls predicted through 0.6000 in the medium term.

Current Level: 0.6264
Resistance: 0.6540
Support: 0.6000
Last Weeks Range: 0.6352-0.6545

The equity/risk aligned New Zealand Dollar (NZD) has again retraced its downward trajectory after getting plenty of support against the Euro (EUR) through the middle stages of last week then giving back gains. The cross reached 0.5860 (1.7070) before closing around 0.5770 (1.7340), into Tuesday struggling around 0.5750 (1.7400) as it looks to retest last week’s long term low of 0.5700 (1.7530) of November 2020. The risk driven NZD may yet suffer more declines into the end of the year despite data improving locally and Eurozone data printing fragile.

Current Level: 0.5742 (1.7415)
Resistance: 0.5775 (1.7700)
Support: 0.5650 (1.7320)
Last Weeks Range: 0.5715-0.5858 (1.7069-1.7495)

The British Pound (GBP) regained control over the New Zealand Dollar (NZD) leading into the weekly close, clawing back mid-week losses to finish up back around 1.9800 (0.5050) levels. Earlier downgrade by Fitch rating agency of the UK credit outlook took a toll, also of note were poor results in UK construction PMIs with the weakest data since May 2020. UK chancellor Kwarteng decision to bring forward his date to deliver his set of economic forecasts to 31 October didn’t go down well. Meanwhile the Bank of England will extend its gilt buying program to 10B per day this week. On the calendar this week we have German Industrial Production and Retail Sales. The cross should hold below 0.5075 (1.9700) this week.

Current Level: 0.5021 (1.9916)
Resistance: 0.5130 (2.0450)
Support: 0.4890 (1.9500)
Last Weeks Range: 0.4986-0.5115 (1.9547-2.0055)

Central Bank divergence has had the biggest impact on the New Zealand Dollar (NZD), Australian Dollar (AUD) cross over the past while with the Aussie bids winning out in recent weeks. However, strangely enough last week’s central bank releases confirmed the RBA was pulling back on future hiking compared to the ongoing tightening cycle by the RBNZ which brought buyers of NZD back to the party. A sign that things were starting to change back to old school cash rate investor attractiveness over recent economic stability. We have no data to release this week, so we expect the cross to bounce around in the recent ranges between 0.8740 (1.1440) and 0.8890 (1.1250).

Current Level: 0.8847 (1.1294)
Resistance: 0.8930 (1.1500)
Support: 0.8700 (1.1200)
Last Weeks Range: 0.8738-0.8855 (1.1293-1.1443)

US Non-farm Payroll Friday came in above expectations with 263k new jobs being added to the workforce more than the 248k predicted. The Unemployment Rate unexpectedly dipped from 3.7% to 3.5% pushing up the US Dollar (USD) across the board, the New Zealand Dollar (NZD) retreating to 0.5600 leading into the close. Monday’s action has seen more investors exit the kiwi as equity indices closed lower post the US Holiday. The NZD posting a fresh low of 0.5545 early this morning a March “covid” 2020 level. Buyers of USD are getting nervous with the cross edging closer to 0.5466 the extreme “covid” low. Past here and we are thin air all the way to the “GFC” lows of 2008/2009 levels below 0.5000. Fresh Missile attacks on Ukraine cities have only added to the USD safe zone plea. As US interest rates continue to rise this should continue to undermine the NZD for a while.

Current Level: 0.5572
Resistance: 0.5850
Support: 0.5470
Last Weeks Range: 0.5593-0.5811

Market Overview

Key Points:

• Equity markets bounce back over 2% on the day taking risk currencies along for the rise
• Markets had previously priced in a 50-point hike today by the RBA, but this has changed to a 50/50-, 50- or 25-point hike
• Markets have turned from the view of speculating on a global recession to pricing one in
• Fed’s Williams sees inflation cooling but underlying pressures remain – global supply chain woes easing
• Japanese media are reporting North Korea have launched a missile and people in Hokkaido should seek shelter, Japan’s second largest Island
• Ukrainian troops take back four provinces in Ukraine after advancing several kilometres
• The British Pound (GBP) was the strongest currency last week while the US Dollar (USD) is the worst performing Read more

Monday 10/10
All Day, JPY, Bank Holiday

Tuesday 11/10
All Day, CAD, Bank Holiday
All Day, USD, Bank Holiday
6:35am, USD, FOMC Member Brainard Speaks
7pm, GBP, Average Earnings Index 3m/y
Forecast: 5.90%
Previous: 5.50%
7pm, GBP, Claimant Count Change
Forecast: 4.2K
Previous: 6.3K

Wednesday 12/10
5am, USD, FOMC Member Mester Speaks
7:35am, GBP, BOE Gov Bailey Speaks
7pm, GBP, GDP m/m
Forecast: 0.00%
Previous: 0.20% Read more

The Australian Dollar (AUD), Euro (EUR) has bounced to all corners over the week, pushing higher to 0.6645 (1.5050) initially before risk sentiment pulled buyers out of AUD, the pair dropping to 0.6495 (1.5400) and back to 0.6550 (1.5270) into Friday. The RBA slowed the pace of their tightening policy Tuesday raising interest rates only 25 points to 2.6% from 2.35%, surprising markets as a 0.50% move was the more popular option. The RBA has pared back their peak in the RBA cash rate to 2.85% and will hike just one more time. With commodity prices predicted to fall in 2023 and the surge in construction costs to dissipate, the RBA also confirming benign wage growth pressures haven’t been an issue like other central banks are experiencing. We see heavy support at the 0.6500 (1.5400) level, past here the next support areas is 0.6170 (1.6200).

The current interbank midrate is: AUDEUR 0.6551 EURAUD 1.5264
The interbank range this week has been: AUDEUR 0.6486- 0.6645 EURAUD 1.5048- 1.5417

The British Pound (GBP) extended last week’s gains to 1.7700 (0.5650) against the Australian Dollar (AUD) midweek before the Aussie fought back post the RBA cash rate announcement. The Reserve bank of Australia slowed the pace of their tightening policy by raising their interest rate 25 points to 2.6%, surprising economists after expectations of a 50-point rise was the favoured option. The RBA has pared back their peak to 2.85% and will hike just one more time most likely on the 1st of November. Markets were disappointed by the recent Truss speech which came up short on details of how she was going to generate growth. Looking ahead we have monthly UK GDP Wednesday expected to come in at 0.2%.

The current interbank midrate is: AUDGBP 0.5744 GBPAUD 1.7409
The interbank range this week has been: AUDGBP 0.5647- 0.5800 GBPAUD 1.7240- 1.7707

The Australian Dollar (AUD) looked good over the early part of the week against the US Dollar (USD) reaching 0.6530 but was sharply sold off Thursday the cross down at 0.6100 as I write, the downtrend continuing. The Aussie finding going tough as the divergence between the RBA and Fed widens. The RBA slowed the pace of their tightening policy by raising their interest rate 25 points to 2.6% from 2.35%, surprising a bunch of market players as a 50-point rise was the preferred option. The RBA has pared back their peak in the RBA cash rate to 2.85% and will hike just one more time. The rise was the 6th in succession since May following rises in June, July, August, and September. The RBA has been indicating for a while they were setting up to start slowing the pace confident that inflation will soon be cooler in 2023. A break below 0.6380 and the AUD enters the Abyss. US Non-Farm Payroll releases tonight.

The current interbank midrate is: AUDUSD 0.6415
The interbank range this week has been: AUDUSD 0.6388- 0.6546