FX News

Risk sentiment is painting a pretty dim view of recent moves in the Australian Dollar (AUD), US Dollar (USD cross with the price reaching fresh lows at 0.6910 early this morning. Crashing through key support at 0.7000 during early Monday trading, fears of a global recession remain high on investor minds as risk products continue to show red. US inflation surprisingly rose late last week y/y to 8.6% from 8.3% and is the highest it’s been since December 1981, laughing off 8.3% expected. There was discussion that the US Inflation had topped out but as energy, fuel and food costs continue to balloon higher. Fed chairman Powell now faces the predicament of what to do next, we expect a rise of 50 points to 1.5% in their June 16th FOMC meeting and 50/50/25 interest rate moves over the following 3 reports. 0.6850 the long-range support holds concern, a breakthrough here the June 2020 level and we could see a further run lower.

Current Level: 0.6934
Resistance: 0.7050
Support: 0.6850
Last Weeks Range: 0.7037-0.7246

Prices in the Euro (EUR), New Zealand Dollar (NZD) reversed off the open at 0.6045 (1.6540) bouncing back towards 0.6000 (1.6660) in early Tuesday trading. It’s very much a risk off tone drifting through markets this week with equities continuing their run lower– the Nasdaq 4.20% down on the day. French voting yesterday in the first round of parliamentary elections will determine if President Macron leads for a second term, he faces an upsurge effort from the opposition spearheaded by Melenchon. NZ GDP q/q prints Thursday the key data this week on the calendar with 0.6% growth predicted for the second quarter 2022 down from 3.0% in the first. The kiwi could struggle this week to gather any pace.

Current Level: 0.6020 (1.6611)
Resistance: 0.6110 (1.6840)
Support: 0.5940 (1.6370)
Last Weeks Range: 0.5976-0.6098 (1.6398-1.6733)

The New Zealand Dollar (NZD), British Pound (GBP) has been reasonably stable in early week trading, sticking around the 0.5160 (1.9380) areas, a big contrast to last week swings post the surprise rise to US Inflation. Risk sentiment this week is poor, investors look to be panicking with another round of large sell orders being hit. NZ GDP second quarter 2022 prints Thursday which is expected to come in at 0.6% down from first quarters 3.0% and put added pressure on the kiwi. The Bank of England’s (BoE) policy meeting and rate hike is also Thursday. The central bank is expected to vote 9-0 to raise rates from 1.0% to 1.25%. A retest of 0.5115 (1.9550) is on the cards, the 3-week daily low.

Current Level: 0.5164 (1.9364)
Resistance: 0.5230 (1.9670)
Support: 0.5085 (1.9130)
Last Weeks Range: 0.5402-0.5227 (1.9131-1.9600)

The New Zealand Dollar (NZD) bounced higher off 0.8960 (1.1160) the November 2017 low vs the Australian Dollar (AUD) clawing back losses to 0.9050 (1.1050) in early Tuesday trading. The NZ economic growth forecast has been revised lower over the next 3 years. Surveyed economists forecast 2022-2023 growth to expand by 2.9%, 2023 to 2024 period was revised lower to 1.9% from 2.8%. This comes ahead of the quarterly release this Thursday. The Trade Weighted Index (TWI) which is a measure of the overall strength of the NZD against a basket of currencies is also forecast to slump over the coming years. Key Australian employment data is released Thursday with the rate expected to tick down to 3.8% from 3.9%. The cross we suspect may struggle to stay above 0.9000 (1.1100) this week.

Current Level: 0.9037 (1.1052)
Resistance: 0.9150 (1.1160)
Support: 0.8960 (1.0930)
Last Weeks Range: 0.8958-0.9046 (1.1054-1.1162)

The New Zealand Dollar (NZD) is in turmoil after falling nearly 1c lower off the open to 0.6250 this morning against the US Dollar (USD), this comes after falls extend last week’s drop from 0.6530 not painting a pretty picture. Global equities have continued to track lower in the aftermath of last week’s surprise hot inflation read which printed at 1.0% m/m in May higher than the forecasted 0.7% as costs in energy, gas and food continue to rise. The safe haven greenback seems to be the “go to” at the moment as investors look to be moving into panic mode as fears of a global recession may not be too far away. Key data out this week is the Federal Reserve statement and Funds Rate with the central bank widely predicted to raise from 1.0% to 1.5%. Long term support at 0.6200 is close by and could be broken this week, this would take us back to May 2020 levels.

Current Level: 0.6267
Resistance: 0.6220
Support: 0.6530
Last Weeks Range: 0.6349-0.6535

Key Points:

Reserve Bank of Australia raises interest rate to 0.85%
World Bank’s latest Global Economic Prospects report raises chances of stagflation and global growth forecasts slumping from 5.7% in 2021 to 2.9% in 2022- much lower than Jan 2022 forecast of 4.1%
US Natural gas prices dive after reports of an explosion at the Freeport LNG facility near Texas
Yellen on the wires saying there is no way Inflation is a decade long problem
Trump’s tariffs on Chinese goods which are still in place are being reviewed by the Biden administration as a potential method of bringing down rising inflation
ECB keeps benchmark interest rate unchanged and stuck to its plan of ending the stimulus program in the third quarter -a less than hawkish response which dampened the Euro
UK May construction PMI 56.4 vs 56.6 expected
Bank of Japan’s Kuroda- we need to continue to support monetary easing to support any economic recovery
US mortgage applications slumped 6.5% week on week, applications are now at a 22 year low raising questions of a possible US economic recession
The British Pound (GBP) is the strongest currency this week with the Japanese Yen (JPY) the weakest

Volatile conditions in the Euro (EUR), Australian Dollar (AUD) pair this week based on both central banks rate decisions created shifting prices with the EUR the better off, edging ahead of the weekly open at 1.4840 (0.6740) to 1.4900 (0.6710) into early sessions today. The RBA raised their cash rate to 0.85% form 0.35% in a hawkish move, most market participants were expecting a 0.25% shift with this doubling. Comments were made of a potential 50-point rise in the July meeting to curb rising inflation. Meanwhile the European Central Bank did the opposite, keeping their rate on hold for a period of time- rises are predicted to begin post third quarter 2022 when they indicate QE will come to a close. This is contrasted to its central bank peers who have all started to tighten policy to bring inflation under control. The question is how aggressive the ECB will be with rates over the coming months. Our prediction is further upside for the Euro.

AUD/EUR pair this week:
The current interbank midrate is: AUDEUR 0.6699 EURAUD 1.4927
The interbank range this week has been: AUDEUR 0.6697- 0.6778 EURAUD 1.4754- 1.4930

Prices in the British Pound (GBP), Australian Dollar (AUD) cross bounced off long term highs to start the week from 0.5800 (1.7260) ,the GBP well supported to 0.5765 (1.7345) into early Thursday trading. Boris Johnson survived a party vote of no confidence overnight 221 out of 359 votes and will remain in office despite a clear dislike of his recent behaviour. The RBA raised their interest rate from 0.35% to 0.85% Tuesday, the release and statement more hawkish than expected pushing the Aussie higher posts release, but only for a while as equities turned red. Another big hike is predicted a few weeks away for the RBA as they “front load” to try and significantly bring down rising inflation. We predict the rate to go another 50 points in July reaching 1.35%. Next week it’s the Bank of England’s turn to hike rates, with the AUD struggling to hold recent gains amid uncertain market conditions we could see further improvements in the GBP develop.

AUD/GBP pair this week:
The current interbank midrate is: AUDGBP 0.5726 GBPAUD 1.7464
The interbank range this week has been: AUDGBP 0.5723- 0.5790 GBPAUD 1.7270- 1.7473

Markets remain restless with uncertainty continuing to brew in the background around rising inflation and the war in Ukraine. The Australian Dollar (AUD), US Dollar (USD) has remained around recent ranges pivoting off 0.7200 areas for most of the past couple of weeks. The RBA hiked their interest rate to 0.85% form 0.35% a whole 25 points more than markets were widely predicting, sending Aussie buyers into a flurry, and improving the currency on the news to 0.7250. Consensus is that the central bank will raise again another 50 points in their July meeting “front loading” the need to bring down surging inflation. All eyes are on US inflation early Saturday with the month on month expected to rise 0.7% for May, with the year-on-year number remaining at 8.3%- The question being have we seen the peak of inflation? If this is the case overextended commodities may be about to soften along with the Australian Dollar.

AUD/USD pair this week:
The current interbank midrate is: AUDUSD 0.7177
The interbank range this week has been: AUDUSD 0.7156- 0.7245