FX News

Big Dollar strength has been the theme over the week with the New Zealand (NZD) drifting lower Friday to 0.6170 levels. We did see 0.6220 midweek after Westpac NZ consumer confidence released better than expected with second quarter data rising to 83.1 from 77.7 previously, however this is still well below the average. Also, of note- Powell’s testimony weakened the USD after saying inflation remains sticky and could rise further. Markets are predicting only 1 further hike from the Fed, but the Fed has two planned. Two hikes we believe would almost certainly put the US economy into recession. Chinese Outlook soured markets Thursday taking equity markets lower and the kiwi with it. The kiwi is looking soft, keeping above 0.6000 will require effort.

The current interbank midrate is: NZDUSD 0.6189
The interbank range this week has been: NZDUSD 0.6133- 0.6237

The Australian Dollar (AUD) was the strongest currency last week against the main board but made no move against the Euro (EUR). Perhaps consolidating after a massive two weeks of gains. Bouncing around the 0.6275 (1.5940) for most of the week from 0.6055 (1.6520) in late May. Villeroy didn’t help the Euro after he made dovish comments saying that inflation had peaked and the ECB may not hike further. With the recent slide in US equities, we may see the EUR pick up ground this week and stage a reversal of sorts towards 0.6210 (1.6100), this will mostly hinge on Eurozone manufacturing data late in the week.

Current Level: 0.6271 (1.5946)
Resistance: 0.6300 (1.6200)
Support: 0.6170 (1.5880)
Last Weeks Range: 0.6252-0.6309 (1.5848-1.5993)

The British Pound (GBP) ground out gains Monday off the open to extend last week’s mini rally against the Australian Dollar (AUD) to 0.5335 (1.8750). The GBP improved from the recent hawkish tone from the BoE and rate hike predictions. Recent wage data and claimant change has firmed the rate hike outlook. Profit taking post last week’s “risk rises” has been evident with the AUD falling back a tad as equities have also eased form recent highs. This week’s y/y UK CPI and official cash rate announcement is the main ticket. Interest rates are expected to be raised from 4.50% to 4.75% as they fight to conquer rising inflation. Momentum we think is to the downside in the cross this week.

Current Level: 0.5352 (1.8684)
Resistance: 0.5420 (1.9180)
Support: 0.5215 (1.8440)
Last Weeks Range: 0.5348-0.5405 (1.8499-1.8698)

The Australian Dollar (AUD) 3-week bull run against the US Dollar (USD) took a breather Monday dropping back to 0.6840 from the recent high at 0.6898 as risk sentiment and US equity markets softened. US Holiday Monday meant markets were thinned out, however we did get some rhetoric from the Fed suggesting they are still hawkish taking up the need for more hikes to come. The next meet-July 27th should represent further tightening. Setbacks towards support at 0.6800 should be well supported for the meantime. With odds better than 50/50 of a hike at the RBA”s next meeting July 4th we see upside on the radar.

Current Level: 0.6851
Resistance: 0.6890
Support: 0.6770
Last Weeks Range: 0.6727-0.6899

Losses for the New Zealand Dollar (NZD) continued into Monday against the Euro (EUR) to 0.5675 (1.7620) with their kiwi underperforming of late in the aftermath of a dovish RBNZ. The Euro has also been in the same boat with ECB’s Villeroy suggesting inflation had peaked and interest rates are close to topping out. On the docket this week is German and French manufacturing with poor results for May predicted. This could undermine recent Euro strength.

Current Level: 0.5675 (1.7621)
Resistance: 0.5820 (1.7760)
Support: 0.5630 (1.7180)
Last Weeks Range: 0.5669-0.5749 (1.7392-1.7638)

The New Zealand Dollar (NZD) continues to slide in the wake of the recent recession news. The British Pound (GBP) has looked solid of late gaining on the kiwi to 0.4835 (2.0680) into Tuesday. The GBP boosted recently from the hawkish Bank of England (BoE) rate hike expectations and employment data. The backing off of US equities has also influenced the NZD with risk sentiment not as positive as we saw last week. The 0.4820 (2.0740) low from April 2020 is looking close with predictions it could test this in the coming days. The Bank of England official cash rate releases Thursday with a hike to 4.75% looking likely.

Current Level: 0.5675 (1.7621)
Resistance: 0.4915 (2.0740)
Support: 0.4821 (2.0340)
Last Weeks Range: 0.4845-0.4915 (2.0342-2.0639)

With Australian Jobs data printing better than expected last week we see the chances of the RBA hiking at the July meeting better than 50/50 chance. This has put the Australian Dollar (AUD) back in the driver’s seat over the New Zealand Dollar (NZD) as it’s well supported on any dips. The cross reaching 0.9050 (1.1050) as I write and approaching the yearly low at 0.9020 (1.1090). All the momentum is with the AUD with predictions the RBA may hike at their next meeting in July and the RBNZ saying recently they were done with tightening policy. Through 0.9000 (1.1111) and this sends a strong signal we could see it drift further well into the 80’s. Clients needing to buy AUD should consider at current prices.

Current Level: 0.9047 (1.1043)
Resistance: 0.9160 (1.1090)
Support: 0.9015 (1.0920)
Last Weeks Range: 0.9049-0.9149 (1.0929-1.1050)

Despite the New Zealand Dollar (NZD) dropping off Mondays open below 0.6200 to 0.6190 against the US Dollar (USD) the cross is still trading in its bull channel from late May’s 0.5985 level. A break below 0.6170 however should support a trend shift back towards 0.6100 zones. The recent drop into recession by the NZ economy after GDP first quarter printed at -0.1% should keep the kiwi fundamentally limited to the north especially with the Federal Reserve remaining hawkish over further rate hikes. US Manufacturing data and Fed chair Powell testified towards the end of the week.

Current Level: 0.6199
Resistance: 0.6360
Support: 0.6100
Last Weeks Range: 0.6104-0.6246

Market Overview

Key Points:

• New Zealand second quarter consumer confidence 83.1 vs 77.7 prior
• ECB confirms we will see a rate hike in July, but September is uncertain.
• Airbus lands second massive order of aircraft from India this year of 500 planes following the previous order of 470 making this the biggest order in history with a value of over 300B.
• China cuts lending rates as the economy starts to slow, the PBOC projected to cut rates again on the 20th of June.
• North Korea is said to be increasing its nuclear weapons production.
• The British Pound (GBP) has been the standout performer in the past week compared to the Japanese Yen (JPY), the worst performing currency. Read more

Tuesday June 20 All Day USD Bank Holiday
1:30pm AUD Monetary Policy Meeting Minutes

Wednesday June 21 6:00pm GBP CPI y/y
Forecast: 8.40%
Previous: 8.70%

Thursday June 22
12:30am CAD Core Retail Sales m/m
Forecast: 0.30%
Previous: -0.30%
12:30am CAD Retail Sales m/m
Forecast: 0.30%
Previous: -1.40%
2:00am USD Fed Chair Powell Testifies
All Day CNY Bank Holiday
8:00pm USD FOMC Member Waller Speaks
11:00pm GBP MPC Official Bank Rate Votes
Forecast: 7-0-2
Previous: 7-0-2
11:00pm GBP Monetary Policy Summary
11:00pm GBP Official Bank Rate
Forecast: 4.75%
Previous: 4.50% Read more