FX News

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

We saw added volatility in the New Zealand (NZD), Euro (EUR) cross this week with economic data raising eyebrows. Monday’s NZ CPI read pushed higher to 7.3% up from 6.9% in the first quarter and above the forecasted 7.1% predicted. The news took the pair to 0.6065 (1.6490) from the weekly open around the 0.6120 (1.6340) area. The ECB raised their cash rate 50 points overnight lifting the rate to zero. The first time they have raised rates in 11 years. Consumers will no longer be paying banks to store their funds. The ECB unveiled a plan to buy debt of Europe’s most valuable economies as it takes aggressive action to bring down skyrocketing inflation and slowing economic growth. Post the release the kiwi made back earlier losses trading to 0.6120 (1.6350) into Friday morning. French and German Manufacturing data will close out the week tonight and is forecast to disappoint. Downside risks for the kiwi remain.

EXCHANGE RATES:
The current interbank midrate is: NZDEUR 0.6113 EURNZD 1.6358
The interbank range this week has been: NZDEUR 0.6044- 0.6157 EURNZD 1.6240- 1.6544

The Australian Dollar (AUD) extended gains made late last week bouncing off a low of 0.6680 climbing into Friday to reach 0.6930 against the US Dollar (USD)- the best performing week for the AUD since February this year. The run was cut short briefly Wednesday on weak survey data and a pork products foot and mouth scare coming out of Indonesia and China into Australia. US Home Sales came in poor with speculation the market is about to collapse. The largest US home builder D.R.Horton lowered its build forecast from 83,000 from 90,000 previously, however not all are convinced with strong jobs creations on the horizon. Chart patterns suggest the Aussie may come up against stern resistance around the 0.6980 -0.7000 area based on the 50% retracement of the recent high at 0.7265 and low at 0.6700. Any upside towards this area should be considered seriously for buyers of USD as long-term trend considerations still point to the downside.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6920
The interbank range this week has been: AUDUSD 0.6780- 0.6937

A slew of US Data misses’ midweek saw the New Zealand Dollar (NZD) extend last week’s run off 0.6040 to clock 0.6270 yesterday vs the US Dollar (USD). US Home Sales fell to a 2 year low as surging borrowing cost deterred buyers and the Philly Fed Manufacturing Index declined in July -12.3% as manufacturing company orders were cut. Monday’s NZ CPI read pushed higher to 7.3% up from 6.9% in the first quarter and above the forecasted 7.1% predicted taking the NZD briefly lower. The kiwi may continue its upward trend towards 0.6300 areas, the Fibonacci 50% resistance level identified on the chart if US equity indices post gains over the coming days. The Nasdaq is on 6 days winning streak. Looking into next week we have the Fed funds rate announcement predicted to rise from 1.75% to 2.5-2.75%

Exchange Rate:
The current interbank midrate is: NZDUSD 0.6240
The interbank range this week has been: NZDUSD 0.6140- 0.6271

The Australian Dollar (AUD) mostly traded around the 0.6745 (1.4830) area over the week against the Euro (EUR) consistent with last week’s low-key moves. The ECB raised their cash rate 50 points overnight, lifting the rate to zero for the first time in 8 years and the first time they have raised rates in 11 years. European banks will no longer receive interest on consumer deposited funds. The ECB unveiled a plan to buy debt of Europe’s most valuable economies as it takes aggressive action to bring down skyrocketing inflation and slowing economic growth. The news weakened the EUR, improving the Aussie to a new high of 0.6785 (1.4740), an early May high. Looking ahead to next week we have key Aussie Q CPI Wednesday.

Exchange Rates:
The current interbank midrate is: AUDEUR 0.6778 EURAUD 1.4753
The interbank range this week has been: AUDEUR 0.6710- 0.6787 EURAUD 1.4732- 1.4907