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Snooze you lose. This week’s moves have been more of the same- with the Australian Dollar (AUD) euphoric agst the New Zealand Dollar (NZD), the cross posting 0.8800 (1.1360) as we mentioned earlier in the week, a possible retest of this level. Markets seem biased in their opinions that the Australian economy is holding up better, the indicators aren’t so warm to the idea, perhaps a little “risk mood” could be affecting investor views. Next week’s calendar is thin with just Orr speaking on Friday. I dare say more of the same could be in store over the coming week. Buyers of AUD should consider options.

The current interbank midrate is: NZDAUD 0.8794 AUDNZD 1.1361
The interbank range this week has been: NZDAUD 0.8795- 0.8937 AUDNZD 1.1189- 1.1369

The Australian Dollar (AUD) clocked another fresh low late last week of 0.6685 (1.4960) against the Euro (EUR) as risk conditions weren’t favourable, equity markets were flogged. The shift from 0.6980 (1.4330) levels cannot be ignored- this marks a proper reversal by the Euro over the last 4 weeks. The Euro is still in trouble given Russia’s invasion of Ukraine, ongoing energy woes and massive supply chain issues, but has the currency turned a corner, certainly the technical picture suggests this. This week’s Eurozone manufacturing data prints which is expected to show further deterioration in this sector.

Current Level: 0.6710 (1.4903)
Resistance: 0.6825 (1.5270)
Support: 0.6550 (1.4650)
Last Weeks Range: 0.6681-0.6816 (1.4671-1.4967)

The English Pound (GBP) continues to depreciate against the Australian Dollar (AUD) extending its run lower from last week’s 1.7220 (0.5810) to 1.6990 (0.5885) early today. A sluggish UK economy with detrimental economic data of late is giving the Aussie room to move. Last week’s UK Retail Sales was terrible coming in at -1.6% vs expectations of -0.5% confirming the economy is in trouble. This week’s key data comes in the form of the Bank of England official cash rate announcement with a 50-point shift higher to 2.25% predicted. We suggested last week a retest of 1.7000 (0.5880) which has eventuated, this week we predict the cross to reach key resistance at 1.6880 (0.5925).

Current Level: 0.5884 (1.6995)
Resistance: 0.5935 (1.7370)
Support: 0.5760 (1.6850)
Last Weeks Range: 0.5810-0.5917 (1.6899-1.7212)

The Australian Dollar (AUD) is bouncing around off the long-term lows around 0.6720 this morning against the US Dollar (USD) as it figures out market directional cues. Below 0.6660 and the cross is staring into the abyss of multi-year lows. Recent downside pressures in equity markets have spelt disaster for the AUD, the latest rhetoric from Governor Lowe isn’t helping the Aussie depreciating the currency. The Fed will most likely hike 75 points this week when they meet with chances of a 100 point move to 3.5% but as the cash rate is approaching its “normal” tightening policy settings we should see smaller moves ahead.

Current Level: 0.6732
Resistance: 0.6900
Support: 0.6650
Last Weeks Range: 0.6668-0.6914

Although the Euro (EUR) is still struggling greatly over most currency crosses this is not so against the New Zealand Dollar (NZD), the kiwi hit hard by the recent bout of “risk off” moves taking the pair to 0.5945 (1.6820) this morning the EUR extending its bull run over recent weeks all the way back to early July levels. Looking ahead we have French and German manufacturing data to print Friday with industry expansion predicted to be soft potentially putting the EUR under pressure. The Euro still looks overbought to us given global risk factors in play; we still believe 0.5930 (1.6860) support will hold over the week.

Current Level: 0.5943 (1.6826)
Resistance: 0.6030 (1.6970)
Support: 0.5890 (1.6580)
Last Weeks Range: 0.5892-0.6038 (1.6560-1.6970)

UK Data hasn’t been that rosy of late with the latest Retail Sales figures dropping -1.6% in August much worse than the -0.50% expected. The British Pound (GBP) struggling against the New Zealand Dollar (NZD) closing the week around 0.5265 (1.9000) levels. This week the Pound has kicked back with the risk correlated kiwi again on the back foot as equity markets slumped. The GBP recovered losses to (0.5210) 1.9190 into Tuesday trading. Thursday’s Bank of England policy announcement and rate release is highlighted on the calendar with the central bank expected to raise rates from 1.75% to 2.25% in a 9-0 vote by members. The GBP may lose ground on the release if the BoE is overly hawkish.

Current Level: 0.5212 (1.9186)
Resistance: 0.5325 (1.9300)
Support: 0.5180 (1.8780)
Last Weeks Range: 0.5180-0.5276 (1.8952-1.9302)

It’s onwards and upwards for the Australian Dollar (AUD) , leaving the New Zealand Dollar (NZD) in the dust. The cross reached 0.8860 (1.1285) this morning, a March 2016 level. Although both currencies have been undermined by global fears and policy tightening by other central banks that may tip the balance into a world recession, the Australian Dollar has fared better based on a tighter labour market and an overall sturdy economy which is fast heading towards “neutral” policy. The RBNZ has more “work” to do to achieve a balanced economy. Meanwhile the pair could test 0.8800 (1.1365) levels in the short to medium term with Australia fending off recession warnings.

Current Level: 0.8856 (1.1282)
Resistance: 0.8945 (1.1420)
Support: 0.8755 (1.1180)
Last Weeks Range: 0.8884-0.8944 (1.1180-1.1256)

The New Zealand Dollar (NZD) continues to decline against the US Dollar (USD) reaching a new low Monday of 0.5928 well below the key level at 0.6000 we have been watching. The latest run down in global sentiment shook the kiwi after being hit hard by last week’s stronger than expected US CPI data. Solid NZ data of late hasn’t helped with more downside expected. This week’s Federal Reserve meet should bring a further 75 points hike to their interest rate with chances of a 100-point rise to 3.5% possible. The recent higher August CPI report which saw the rate jump from expectations of 8.1% to 8.3% has led the market to price chances of a 100-point hike. The overall response will depend on where they see the inflation heading.

Current Level: 0.5963
Resistance: 0.6000
Support: 0.5900
Last Weeks Range: 0.5938-0.6158

Market Overview

Key Points:

• The Queen’s Funeral was predicted to have been watched by over 4 billion viewers around the world making it the most watched broadcast in history.

• The Federal Reserve is expected to continue with their tightening plans this week and raise rates 75 points to 3.25%, however its 50/50 the Fed raises 1%
• Member Joachim of the European Central Bank spoke over the weekend saying “we must bring inflation back under control, we mustn’t let up, even if the economy worsens
• Japan is to use 3.5T (209B USD) in reserve funds reserved for economic measures to address inflationary pressures
• ANZ picks the RBNZ Cash rate to peak at 4.75% mid 2023
• We expect an overly hawkish tone at this week’s Bank of England rate release which could stir UK recession fears and further weaken the Pound
• The US Dollar (USD)  has been the strongest currency over the month of September while the Japanese Yen (JPY) has been the weakest, this is closely followed by the New Zealand Dollar (NZD)
• The NZD has broken through key support and psychological 0.6000 with this level now acting as resistance in the NZD/USD cross, if we don’t see a proper pickup through this zone this week we could see further “southern action”  continue.

Major Announcements last week:

• US CPI q/q 0.6%
• UK CPI y/y 9.9% – forecast 10.0%
• NZ GDP q/q 1.7%
• Australian Unemployment Rate 3.5% vs 3.4% predicted
• UK Retail Sales August -1.6%

Monday 19/09
All Day, JPY, Bank Holiday
3pm, NZD, RBNZ Gov Orr Speaks
All Day, GBP, Bank Holiday

Tuesday 20/09
1:30pm, AUD, Monetary Policy Meeting Minutes

Wednesday 21/09
12:30am, CAD, CPI m/m
Forecast: -0.10%
Previous: 0.10%
12:30am, CAD, Common CPI y/y
Forecast: 5.50%
Previous: 5.50%
12:30am, CAD, Median CPI y/y
Forecast: 5.00%
Previous: 5.00%
12:30am, CAD, Trimmed CPI y/y
Forecast: 5.50%
Previous: 5.40%
5am, EUR, ECB President Lagarde Speaks Read more