FX News

The British Pound (GBP) has had its best week against the Australian Dollar (AUD) since mid-August clocking 1.7220 (0.5810) midweek boosted by better-than-expected UK Inflation data printing and assisted by a general risk off tone. UK Inflation came in at 9.9% off 10.1% y/y the highest it’s been since 1982 followed by Australian jobs data, the Unemployment Rate unexpectedly clicking higher to 3.5% from 3.4% in August as the workforce added 33,500 jobs to the economy. The bullish trend in the cross should continue with a retest of 0.5880 (1.7000) likely in the coming days but global risks remain

The current interbank midrate is: AUDGBP 0.5845 GBPAUD 1.7108
The interbank range this week has been: AUDGBP 0.5809- 0.5919 GBPAUD 1.6893- 1.7213

The Euro (EUR) extended gains over the week on the Australian Dollar (AUD) to 1.4930 (0.6700) a mid-July low, the 3rd week straight the Euro has outperformed. Markets were risk averse over the first half of the week before Aussie employment data printed. Data was generally in line with expectations with the Unemployment Rate rising to 3.5% and the workforce adding 33,500 jobs. No data published in the Eurozone meant big picture themes were also in play. Fib support at 0.6665 (1.5000) should hold into the close, we expect a reversal towards 0.6800 (1.4700) next week.

The current interbank midrate is: AUDEUR 0.6697 EURAUD 1.4932
The interbank range this week has been: AUDEUR 0.6692- 0.6816 EURAUD 1.4670- 1.4941

Key Points:

Fed member Dalio sees the Federal Reserve hiking interest rates to 4.5% possibly as high as 6.0% …currently the rate is 2.5% with a rate decision on the calendar next week.
Today is one of 4 yearly “Quadruple Witching” days where 4 different sets of Futures and Options expire on the same day. These days can often signal extremely volatile moves in financial products including currencies when traders close or roll positions. Today marks an extra massive day as over 3 times the normal volume at roughly 3.3 Trillion worth of products fall due
NZ Manufacturing for August rises to 54.9, solidly in expansion- the highest level since July 2 01
US Core Retail Sales for August -0.3% off 0.0% expected
Australian New Home Sales declined 1.6% over August after a 13.1% drop in July
The US Dollar (USD) has been the strongest currency over this week while the New Zealand Dollar (NZD) is the weakest on the main board
The NZD has broken through key support and psychological 0.6000 we will see over the following few days if this break is sustained and ingrained

Another week another new low in the New Zealand Dollar (NZD) dropping to 0.5955 as I write against the US Dollar (USD). This is an early May 2020 level set as the kiwi was recovering off 0.5530 style lows in line with the start of the covid pandemic in early 2020. This week’s NZ second quarter GDP surprised markets printing much higher than the 1.0% predicted at 1.7% rebounding hard off first quarter’s -0.2% from improved consumer spending and the opening of tourism. Reports suggests a cautionary approach heading into the late months of 2022 and early 2023 with “real” incomes eroding which could undermine growth forecasts. Next week’s key standout is the Fed policy and rate announcement with expectations the Fed will hike 75 points to 3.25%. Long range support in the pair is 0.5680 – there is not a lot fundamentally which could return the kiwi higher.

The current interbank midrate is: NZDUSD 0.5967
The interbank range this week has been: NZDUSD 0.5965- 0.6160

The Euro (EUR) climbed off the weekly open reaching 1.4820 (0.6750) against the Australian Dollar (AUD) after strong stock gains were made but soon lost ground falling back to 1.4690 (0.6810) early today. European equity markets rose after natural gas prices fell around 8% after Ukraine recaptured a large chunk of territory. Lagarde says she will provide liquidity to banks not energy companies in the wake of soaring prices, here we go again printing cash. This week’s Aussie employment figures is our focus with the country predicted to hold its record low unemployment at 3.4% and the number of people looking for work decreases. Topside moves made recently by the Euro we consider “short term” with the currency still under enormous pressures.

Current Level: 0.6786 (1.4736)
Resistance: 0.6865 (1.5100)
Support: 0.6620 (1.4570)
Last Weeks Range: 0.6720-0.6865 (1.4565-1.4881)

UK GDP for July printed at 0.2% Monday pushing up the British Pound (GBP) momentarily to 1.7030 (0.5870) against the Australian Dollar (AUD) from the opening price of 1.6925 (0.5910). This was a small miss on the 0.5% expected but nevertheless positive data. Services grew by 0.4% but “Information and Communication” was the main driver. The Truss government will be aiming to expand energy production and lift the fracking ban, meanwhile the Bank of England has pushed back their policy meeting to September 22 in light of the Queen’s passing. Aussie employment data prints Thursday and could give the AUD a nudge if a change to the workforce increases.

Current Level: 0.5885 (1.6992)
Resistance: 0.5925 (1.7140)
Support: 0.5835 (1.6879)
Last Weeks Range: 0.5837-0.5928 (1.6869-1.7132)

The Australian Dollar (AUD) continued its surge higher off Monday’s open reaching 0.6900 early morning Tuesday against the US Dollar (USD) on risk improvement. USD long positions look to have cashed up giving way for a rally of sorts, also equity and commodity rises have also helped to inspire the AUD. We have quite a bit of event risk this week with a full calendar of data releasing. Aussie jobs data should reflect a sharp rebound and a potential drop in unemployment. The main event being US August Inflation with forecast predicting -0.1% m/m. Recent comments from the Fed suggest a soft CPI read won’t persuade them from hiking a further 75 points next week. Fib resistance at 0.6900 suggests we could see a little downside develop in the cross.

Current Level: 0.6883
Resistance: 0.6950
Support: 0.6850
Last Weeks Range: 0.6697-0.6877

Prices in the Euro (EUR), New Zealand Dollar (NZD) Monday reached 0.6030 (1.6580) a 10-week low before pulling back towards 0.6080 (1.6450) into Tuesday sessions. European stocks soured on the news Ukrainian troops had reclaimed a large amount of territory back off Russia Monday pushing Russian forces all the way back to the North-western border. Earlier Lagarde offered a line of credit to European banks amidst the ongoing energy crisis helping the EUR push higher. However long-term currency shifts in the Euro’s favour look limited with long term structural energy prices remaining a massive constraint to European growth. The Euro looks overbought.

Current Level: 0.6064 (1.6490)
Resistance: 0.6160 (1.6600)
Support: 0.6025 (1.6230)
Last Weeks Range: 0.6033-0.6161 (1.6231-1.6573)

Monthly UK GDP for the month of July printed slightly under expectations at 0.2% vs 0.3% expected, markets seeing this as positive, the data helping to push the GBP up to 1.9100 (0.5235) before falling to 1.9000 (0.5265) early Tuesday. Also, of note the Truss govt will be looking to expand energy production and lift the fracking ban. The UK Central Bank will also defer its policy meeting from the original 15th September to the 22nd of this month in light of the Queen’s death. UK CPI prints midweek and is expected to be a big number – over 10.0% y/y. Second quarter NZ growth prints Thursday and is predicted to come in around 1.0% and could give the kiwi a kick higher, it’s not unreasonable that we could see a retest of the prior high of 0.5300 (1.8900)

Current Level: 0.5256 (1.9025)
Resistance: 0.5290 (1.9120)
Support: 0.5230 (1.8900)
Last Weeks Range: 0.5230-0.5325 (1.8784-1.9119)

Prices in the New Zealand Dollar (NZD), Australian Dollar (AUD) have dropped to 0.8914 (1.1220) suggesting ongoing support as we mentioned earlier for the Aussie. A retest of the long term low at 0.8890 (1.1250) looks imminent. Earlier governor Lowe said he expects to raise interest rates over the coming months but slow the pace of tightening. The full effect of interest rates has yet to flow through to higher consumer mortgage payments. Both NZ GDP q/q and Australian job’s data are expected to print well. NZ GDP for the second quarter should reflect an improving economy (1.0%) post covid lockdowns and restrictions. Sellers of AUD should consider with levels back under 0.9000 (1.1100) alluring.

Current Level: 0.8912 (1.1212)
Resistance: 0.9010 (1.1250)
Support: 0.8890 (1.1100)
Last Weeks Range: 0.8917-0.8999 (1.1113-1.1214)