FX News

The Australian Dollar (AUD) retreated off the open against the Euro to hit resistance at 0.6725 (1.4870) before falling back to 0.6695 (1.4940) into Tuesday. Early “risk on” was evident but replaced by uncertainty with the Eurozone inflation printing at 8.1% vs 7.8%- the highest in over a decade with energy and food prices equating for two thirds of the number. This raises questions on how the ECB will delicately raise rates while keeping inflation in check and not causing a disastrous situation of the economy stagnating. The ECB is forecast to raise by 25% at the July meeting. The AUD may be encouraged by today’s GDP first quarter read, predicted to be 0.6% . Analysts have voiced saying this figure may be a little light. A breakthrough 0.6725 (1.4870) could signal an extended run higher from the AUD.

Current Level: 0.6698 (1.4929)
Resistance: 0.6760 (1.5180)
Support: 0.6590 (1.4800)
Last Weeks Range: 0.6581-0.6718 (1.4885-1.5194)

The British Pound (GBP), Australian Dollar (AUD) broke free from its 3-week trading range Monday passing 0.5680 (1.7610) on its way to reach 0.5710 (1.7510) early Tuesday. Higher stock prices this week and US Fed repricing its rate hike expectations has given support to the Aussie. This comes off the back of a poor economic outlook in China and the small miss in Australian Retail Sales. The key standout on the economic docket this week is today’s Australian GDP with predictions of 0.6% growth for the first quarter 2022. Anything lower than this could test the AUD.

Current Level: 0.5700 (1.7543)
Resistance: 0.5810 (1.7800)
Support: 0.5620 (1.7220)
Last Weeks Range: 0.5617-0.5685 (1.7588-1.7801)

The Australian Dollar (AUD) extended last week’s gains against the US Dollar (USD) clocking 0.7202 before dropping back. US Fed hike predictions have been revised lower following a poor read in the first quarter GDP release which came in at -1.5% vs -1.3%. Analysts now predict the Fed will hike rates this year to 2.5%-2.75% through to December lower than earlier initial numbers of 2.75% -3.0%. The first quarter GDP is the first in 5 quarters to contract suggesting alarming predictions of upcoming trade deficit numbers. Non-Farm Payroll Friday is expected to show improving unemployment (3.5%) and moderate jobs results for May. We see stiff resistance at 0.7220 suggesting a pullback could be in order.

Current Level: 0.7191
Resistance: 0.7220
Support: 0.7070
Last Weeks Range: 0.7035-0.7164

New Zealand’s ANZ Business outlook survey painted a dim view of the NZ economy consistent with a sluggish economy. The NZD is a little weaker this week – nothing too serious, strangely only posting small losses against the Euro (EUR) to 0.6070 (1.6470) earlier today. The ECB will start their tightening cycle in July when they hike their interest rate 25 points marking the first hike in over a decade. Even with inflation numbers creeping up over the Eurozone region the central bank will be cautious with hiking too fast causing a  stagflation effect. Overnight Eurozone inflation came in at 8.1% y/y, higher than the 7.8% expected causing more pain for the ECB. The economy is already struggling in the wake of the Ukraine war with increased prices across the board rising causing more pressure for consumers and businesses going forward. The latest oil embargo will add to EUR pressures adding further speculation of a recession. The 3-week bull run in the kiwi may continue for a bit.

Current Level: 0.6084 (1.6436)
Resistance: 0.6135 (1.6800)
Support: 0.5950 (1.6300)
Last Weeks Range: 0.5990-0.6108 (1.6370-1.6692)

Risk currencies were buoyant Monday continuing the run from late week, the New Zealand Dollar (NZD) pushed through to 0.5190 (1.9260) against the British Pound (GBP) before dropping back to 0.5160 (1.9375) early Tuesday. The Pound has been bid overnight on the back of US Dollar repricing of US Federal rate hike expectations. The UK government announced a financial aid package to counteract the massive rises in the cost of living recently. Boris Johnson introduced a “tax on oil profits” which is expected to raise around 5B over the year to help cash payments to millions. 8M of the countries lowest income earners will receive GBP 650.00 as a one-off payment. Resistance at 0.5195 (1.9250) the 50% fib retracement area should hold for a while with predictions of a retest at 0.5100 (1.9600) over the coming days.

Current Level: 0.5174 (1.9327)
Resistance: 0.5250 (1.9640)
Support: 0.5090 (1.9050)
Last Weeks Range: 0.5114-0.5194 (1.9250-1.9553)

The Australian Dollar (AUD) has reversed last week’s losses against the New Zealand Dollar (NZD) into Tuesday, the pair trading to 0.9070 (1.1030) from the open at 0.9140 (1.0940). The Aussie better bid off the back off sinking NZ House prices, talk of recessions and a spike in Ore prices (135.50). Aussie GDP q/q is expected to print later today at 0.6% – well down from the last Q of 2021 at 3.4%. However, some analysts predict growth could print higher than forecast thus giving the AUD a possible boost.

Current Level: 0.9077 (1.1009)
Resistance: 0.9190 (1.1100)
Support: 0.9010 (1.0880)
Last Weeks Range: 0.9071-0.9182 (1.0890-1.1023)

US Holiday conditions Monday affected flow, the New Zealand Dollar (NZD) bumping to 0.6560 areas before retreating towards 0.6480. We have seen a wave of equity buying of late propping up the kiwi, but recent reversals have seen the kiwi on the backfoot over the past few hours. The hawkish tone we have seen of late in Fed rate forecasts have propped up risk but with recent first quarter GDP down -1.5% vs -1.3% worse than predicted there has seen a rethink from the Fed. Earlier numbers of where the interest rate might sit at year end were around 2.75%- 3.0% but this has been pared back to 2.5% – 2.75%. It’s certainly shaping up to be fascinating viewing with the Fed stuck between a rock and a hard place on monetary policy with forecasts of a recession looming. The NZ House Price Index (HPI) fell another 0.8% in May following a 0.9% in April making it the biggest 3 month fall since 2010 when markets were still recovering from the GFC.

Current Level: 0.6527
Resistance: 0.6570
Support: 0.6430
Last Weeks Range: 0.6414-0.6547

The Australian Dollar (AUD) has held up well this week against the US Dollar (USD) as risk sentiment globally improved. Prices early Friday is milling around the 0.7100 area with further upside bias predicted over the day. Prelim US GDP came in slightly worse than predictions at -1.5% vs -1.3% for the first quarter as stronger consumer spending failed to offset weak business and private sector spending. There were no surprises from the Federal Reserve overnight when they read the May meeting minutes with participants agreeing that a 50-point hike to the interest rate was appropriate at their next June and July meetings. We have seen a slight pullback in precious metals weighing on the Aussie but was nullified by pending US home sales m/m which printed -3.9% after -1.9% was excepted for April. US holiday Monday should give us a slow start to the week.

The current interbank midrate is: AUDUSD 0.7101
The interbank range this week has been: AUDUSD 0.7034- 0.7123

We have seen a lot of volatility in the British Pound (GBP), New Zealand Dollar (NZD) this week with price moving lower early week then advancing to 0.5195 (1.9250) midweek as the RBNZ hiked interest rates from 1.5% to 2.0%. There is undoubtedly more to come for the RBNZ with predictions we may see the interest rate climb to 3.3% by the end of this year. Thursday’s flow was back with the GBP with hawkish speak coming from the Bank of England sending moves back towards 0.5130 (1.9500). The UK PMI read for May confirmed the economy ground to a halt siting rising inflation which are weighing on demand conditions. This is not helping to ease fears of a looming recession in the UK as early as next year. The BoE has already priced in 5 more hikes for 2022 but now could pull back to 4 or less. Overall trend in the NZD/GBP is still bearish with expectation of a retest of 0.5080 (1.9680) the previous low in the coming days.

The current interbank midrate is: NZDGBP 0.5135 GBPNZD 1.9474
The interbank range this week has been: NZDGBP 0.5114- 0.5195 GBPNZD 1.9247- 1.9553

The New Zealand Dollar (NZD) is up around 1c against the US Dollar (USD) this week climbing to 0.6515 Wednesday post the RBNZ statement before drifting back in the last 48 hours to 0.6480. The RBNZ raised the cash rate by 50 points to 2.0% from 1.5% as expected, sending the kiwi higher. The RBNZ has now hiked 175 points from last October with more rises on the table at upcoming central bank meeting later in the year. Predictions are for the cash rate to peak at 3.25% by Christmas. Personally we hold the view that being too aggressive could derail the economy as efforts are made to bring the inflationary target back to 1-3%. With equities struggling and wider concerns over global uncertainty with the war on Ukraine we could see further NZD selling into rallies in the near to medium term. For now, buyers should enjoy the kiwi spikes while on offer.

The current interbank midrate is: NZDUSD 0.6483
The interbank range this week has been: NZDUSD 0.6414- 0.6513