FX News

Price action in the New Zealand Dollar (NZD) continues to track on a downward trajectory against the English Pound (GBP) following a series of long-term lower lows and lower highs. This week the kiwi is down again on risk sentiment as Chinese data has weighed on risk conditions and the recent RBNZ policy pause. This week’s inflation data for both countries will be key with both predicted to print lower. Any forthcoming hike by the Bank of England (BoE) will be determined by the number. Solid resistance at 0.4880 (2.0500) suggests we could see a retest of 0.4785 (2.0900) over the week.

Current Level: 0.4839 (2.0665)
Resistance: 0.5060 (2.0900)
Support: 0.4785 (1.9760)
Last Weeks Range: 0.4780-0.4882 (2.0481-2.0917)

The New Zealand Dollar (NZD) clocked a fresh 8-week high Monday reaching 0.9330 (1.0720) against the Australian Dollar (AUD) before giving back gains to 0.9275 (1.0780). The kiwi has been held up mostly by last week’s hawkish RBNZ policy hold. The RBA pause at 4.10% will likely extend into coming months as inflation risks are likely to be positive. All eyes will be on NZ CPI data Wednesday with a predicted drop to the headline inflation figure possibly to 5.2% from 6.7%.We may see the NZD weaken off towards the week’s end.

Current Level: 0.9285 (1.0762)
Resistance: 0.9460 (1.1050)
Support: 0.9050 (1.0570)
Last Weeks Range: 0.9234-0.9324 (1.0725-1.0829)

The New Zealand Dollar (NZD) came up against stiff resistance Monday at 0.6390 against the US Dollar (USD) after last week’s rally from around 0.6200 levels. The run up to current levels looks overbought signalling downside moves have come into play. A break above 0.6400 would be needed to cement further upside confidence in higher traffic. The Fed pause is still uncertain with some analysts suggesting a 25-point hike on the 27th of July is a done deal? Soft Chinese data also to blame. The kiwi however could be well supported by stronger risk over the coming days. NZ CPI data prints tomorrow and should represent a much lower headline figure somewhere around 5.4%. Buyers of USD should consider these levels.

Current Level: 0.6333
Resistance: 0.6400
Support: 0.6000
Last Weeks Range: 0.6165-0.6411

Market Overview

Key Points:

• Poor Chinese data suggests the Peoples Bank of China should cut rates (RRR) “Reserve Requirement Ratio” to support the economy.
• Goldman Sachs are suggesting the chances of a US recession over the next 12 months is less than 20%
• The International Monetary Fund says the inflation seems to have peaked.
• The Australian Treasurer Chalmers expects a substantial downturn in the Australian market with CPI to track lower while unemployment to go higher.
• The Euro (EUR) is the strongest performer over the past week with the US Dollar (USD) Dollar the worst performer. Read more

Monday July 17
All Day JPY Bank Holiday
2:00pm CNY GDP q/y
Forecast 7.10%
Previous 4.50%
2:00pm CNY Industrial Production y/y
Forecast 2.50%
Previous 3.50%

Tuesday July 18
12:30am USD Empire State Manufacturing Index
Forecast -3.5
Previous 6.6
1:30pm AUD Monetary Policy Meeting Minutes Read more

Market Overview
This week will be highlighted by interest rate decisions from the RBNZ and the Bank of Canada, while also focusing closely on inflation data out of Europe and the USA. Inflation had been crashing in recent times, so any reversal in the trend, could have a major impact on the direction of currencies. Trade agreements with the EU and a European Finance Ministers Summit will add some macro geo-political perspective and spice to markets this week, but inflation and growth remain key drivers.

Major Announcements last week:

-China/German/USA Inflation Reports

-RBNZ and Bank of Canada Rate Decisions

-UK GDP Growth

-China Trade Exports/Imports.

Europe has been negotiating a trade agreement with Australia and separately with Japan and NZ. These trade negotiations will have little impact on the currencies and the cross-rates, in the short-term, but are a good sign for the future of the European economy. Inflation in Germany has been falling fast, but any resurgence, will reinforce hawkish monetary policy and add to the upward pressure on the EURO.

Current Level: 0.6105 (1.6380)
Resistance: 0.6121 (1.6337)
Support: 0.6067 (1.6482)
Last Weeks Range: 0.6051-0.6113 (1.6526-1.6358)

The Bank of England remains hawkish, as they attempt to get runaway inflation under control. How much, these rising interest rates hit the consumer and the economy, will be the big question. UK GDP growth, this coming week, will be a window into the state of the economy. Higher interest rates will drive the GBP higher, but recessionary pressures should counter-balance the pressure.

Current Level: 0.5231 (1.9117)
Resistance: 0.5249 (1.9052)
Support: 0.5182 (1.9299)
Last Weeks Range: 0.5231-0.5157 (1.9116-1.9391)

The RBA’s pause in interest rate rises, has added to the downward momentum of the currency, along with recessionary pressures hitting commodity demand and prices. This week’s inflation number, out in the USA, will be a big directional driver of the AUD, this coming week. The expected rebound in the post-COVID Chinese economy, has been restrained and the Chinese trade numbers, set to be released Thursday, will have an impact.

Current Level: 0.6805
Resistance: 0.6827
Support: 0.6713
Last Weeks Range: 0.6785-0.6869

ECB President LeGarde has been extremely hawkish in monetary policy, with the mantra, ‘higher for longer’. The ECB have been way behind on the yield curve, acting on inflation very late in the game, which gives them some latitude for further rate rises. Recessionary conditions in Europe prevail and put a brake on interest rates and the currency.

Current Level: 0.5671 (1.7633)
Resistance: 0.5678 (1.7612)
Support: 0.5622 (1.7787)
Last Weeks Range: 0.5611-0.5668 (1.7822-1.7642)