FX News

The Australian Dollar (AUD) extended moves higher to 0.6820 (1.4670) against the Euro (EUR) Friday before being slammed on worse than predicted PMI reads slipping to 0.6755 (1.4800). This week’s action has been all AUD, the cross moving back towards long term levels around 0.6820 (1.4670) this morning. German Business Climate disappointed, slipping to 88.6 in July from June’s 92.2- back to a June 2020 level with businesses expecting the economic climate to become much more difficult over the coming months. Particularly notable was the impact of the gas shortage weighing on the economy as disruptions to supply via Russia to Europe bite. A retest of 0.6850 (1.4600) looks on the cards.

Exchange Rates
Current Level: 0.6800 (1.4705)
Resistance: 0.6840 (1.5170)
Support: 0.6590 (1.4620)
Last Weeks Range: 0.6707-0.6825 (1.4651-1.4909)

The Australian Dollar (AUD) made attempts to push past resistance at 0.5795 (1.7260) Friday against the British Pound (GBP) but failed to enter new territory into fresh long-term levels, reversing to 0.5750 (1.7400) Monday. Prices this morning were back at 0.5775 (1.7320) after equity flows were not AUD supportive. Last week’s bumper CPI published at 9.4% a 40 year high as the cost of living for consumers got tougher. Talk from the Bank of England is that a further 50 points move higher in the cash rate is needed to reel it in. The central bank has already had 5 consecutive rises, but the bank will need to commit to its promise of bringing down inflation back to its 2% target. Aussie CPI releases Wednesday and is predicted to hold at 5.1% y/y. On the chart- anything past 0.5830 (1.7150) signals multi year highs.

Current Level: 0.5766 (1.7343)
Resistance: 0.5805 (1.7800)
Support: 0.5620 (1.7230)
Last Weeks Range: 0.5693-0.5811 (1.7206-1.7565)

The Australian Dollar (AUD) extended gains Monday off 0.6880 against the US Dollar (USD) into Tuesday sessions to 0.6960 as it targets the key 0.7000 zone. A mix of equity markets tracking higher and weak US data has pushed up the Aussie. US unemployment was soft coming in at 251,000 over 240,000 a new 8 month high, also US PMI was light adding speculation of a global downturn ahead. Analysts have been calling for more aggressive rate hikes from the RBA, meanwhile this week’s Federal Funds rate and policy announcement will be our focus. The Fed is also expected to take a tough approach to lowering inflation and could hike as much as 75-100 points on Wednesday. The biggest move since 1994. Topside moves in the cross may be limited.

Current Level: 0.6955
Resistance: 0.7000
Support: 0.6700
Last Weeks Range: 0.6781-0.6975

The New Zealand Dollar (NZD) extended gains against the Euro (EUR) to 0.6165 (1.6220) late last week posting a fresh 11 week high. Weak PMI reads with Eurozone and German composite PMIs contracted in June the worst report in over two years. Declines in domestic and export demand indicated an uncertain business environment based on supply shortages and expectations the economy will worsen over the coming months. The war in Ukraine will continue to impact for some time, disruptions to gas supply into Europe isn’t helping. Today we are buying EUR over the 0.6100 area representing solid interest around these levels. The mid-June rally in equity markets has been helping, although at current levels these look very toppy suggesting a new trend to the downside could be approaching over the next couple of weeks. Don’t leave it too late.

Current Level: 0.6119 (1.6342)
Resistance: 0.6160 (1.6730)
Support: 0.5980 (1.6230)
Last Weeks Range: 0.6043-0.6162 (1.6226-1.6546)

With UK inflation rising to 9.4% mid last week the New Zealand Dollar (NZD) has been better bid against the British Pound (GBP) climbing to 0.5245 (1.9070) marking the first daily close above 0.5200 since early June. Monday moves saw a kick back from the GBP with prices reversing to 0.5200 (1.9240) into Tuesday. Broad based declines in the US Dollar should continue to support the NZD for a while as long as equity markets continue to bounce and risk flow continues. It’s a slow week for economic data for the cross with just the RBNZ Statement of Intent Friday.

Exchange Rates:
Current Level: 0.5189 (1.9271)
Resistance: 0.5235 (1.9630)
Support: 0.5095 (1.9100)
Last Weeks Range: 0.5137-0.5245 (1.9065-1.9463)

Risk sentiment has picked up this week supporting the Australian Dollar (AUD). Prices into Tuesday trading were through key 0.9000 (1.1100) clocking high 89’s as the Aussie was better supported. Iron Ore traded off earlier lows up at 103.00 per tonne and talk of CPI Wednesday possibly rising above the current 5.1% y/y should confirm a 50–75-point hike at next week’s RBA policy meeting. Long term form suggests running with AUD momentum over the next while. A proper break past 0.9000 (1.1100) on the chart shows the next target is 0.8860 (1.1290) or the 6-year 2016 low.

Current Level: 0.8999 (1.1102)
Resistance: 0.8960 (1.0970)
Support: 0.9115 (1.1160)
Last Weeks Range: 0.9001-0.9100 (1.0988-1.1109)

The New Zealand Dollar (NZD) has been doing well against the US Dollar (USD) recently topping out late last week at 0.6300 before dropping slightly into the close. US Unemployment claims came in light at 251k compared to 240k spooking sentiment- the report hitting a fresh 8 month high. Also of note was softer US PMI data adding fuel to the overall concern of the global economic downturn. The kiwi was back trading around 0.6270 late yesterday boosted by equity markets closing higher. We indicated earlier we expected the kiwi to rise to 0.6300 as it did before tapering off. The 50% retracement area around this level still represents hard resistance. We suspect upside could be limited over the remainder of the week.

Exchange Rate:
Current Level: 0.6259
Resistance: 0.6350
Support: 0.6100
Last Weeks Range: 0.6139-0.6302

Key Points:

US Equities have put in decent performances this week, overnight Treasury yields sank post the ECB decision rallying stocks and lifting “risk”
The Iron Ore slump continues, dropping to 100.00 per tonne this morning
UK inflation rose in June to 9.4% from May’s 9.1% making it the highest rate since 1982
The ECB surprised markets with a rise of 0.50% overnight from the 0.25% expected- this is the first time in 11 years
Canadian CPI rose to 8.1% in June from May’s 7.7%- the highest read since January 1983
US President Biden has Covid- he has reported mild symptoms Read more