FX News

Massive support for the US Dollar (USD) of late has seen the New Zealand Dollar (NZD) sold down to 0.6412 in early morning trading, the lowest level since late June 2020. Risk flow hasn’t been kind to the kiwi in the wake of equity markets extending losses. Broad concerns over the war in Ukraine remain as UN backed “safe passage” has seen people evacuated from under the steel mill in Mariupol even though the Russians are still shelling the plant. Meanwhile Russia is making little progress in Dondas as meetings take place in Brussels to discuss further imports of Russian oil. The Federal Reserve meet this week to talk over policy with predictions they will raise the cash rate from 0.50% to 1.0% as Powell is set to go large on maintaining some sort of control over rising inflation. He may even hint as to how high interest rates will go as he manages overheating prices. Later in the week is the all-important US Non-farm Payroll release, this could rub salt into the NZD wound. On the chart we see little in the way of key support at 0.6250.

Current Level: 0.6458
Resistance: 0.6780
Support: 0.6250
Last Weeks Range: 0.6450-0.6644

Tuesday 03/05
2:00AM, USD, ISM Manufacturing PMI
Forecast: 57.5
Previous: 57.1
4:30PM, AUD, Cash Rate
Forecast: 0.25%
Previous: 0.10%
4:30PM, AUD, RBA Rate Statement

Wednesday 04/05
10:45AM, NZD, Employment Change q/q
Forecast: 0.10%
Previous: 0.10%
10:45AM, NZD, Unemployment Rate
Forecast: 3.10%
Previous: 3.20% Read more

Fallout from the Russian/Ukraine war continues to send the Euro (EUR) lower not only against the Australian Dollar (AUD) but against the main board of currency crosses. Equities slipped lower at the start of the week as “risk” conditions faded sending the cross to 0.6670 (1.5000) before recovering to 0.6745 (1.4830) this morning. US indices and commodity prices are recovering somewhat as we head into the NY daily close. The German Business Climate Index came in better than the 88.3 expected at 91.8 surprising punters however analysts warn of early optimism in a war. Australian CPI q/q rose 1.3% yesterday for Q1 following a 0.8% rise in the 2021 Q4. Year on year this takes it from 3.5% to 5.1% surpassing forecasts of 4.6%. To blame was surging transport costs, fuel prices and building costs. This inflation release officially puts the RBA “behind the curve” as inflation is now outside the RBA’s target band. This benign said we expect the RBA to hike rates at next week’s meeting from 0.10% to 0.25%. To us the likely scenario is a retest of 0.6825 (1.4650) developing over the coming days.

Current Level: 0.6744 (1.4830)
Resistance: 0.6870 (1.5200)
Support: 0.6580 (1.4550)
Last Weeks Range: 0.6705-0.6876 (1.4543-1.4915)

The Australian Dollar (AUD) moved off the early 6 week low of 0.5595 (1.7880) against the British Pound (GBP) Monday well supported against a “risk” off backdrop recovering to 0.5710 (1.7520) Wednesday as equity markets posted gains. UK economic data of late hasn’t been flash with UK debt service and public sector wage costs blowing out and Bank of England’s Bailey on the wires less hawkish. Aussie CPI has again as predicted ballooned to 5.1% year on year from 3.5% rising 1.4% q/q ending March. This raises the question of when and how much the RBA could/should raise interest rates at next week’s meeting. As inflation is miles outside the target band now, we expect a hike of 0.15% to 0.25% with a possible monster rise in June if an economic perfect storm develops. Late next week we have the Bank of England (BoE) Monetary Policy Report and official cash rate with expectations of a hike to 1.0% from 0.75%. The BoE have previously said they would start selling bonds when the rate hits 1.0% but we think they will wait a while longer. On the chart – a retest of 0.5620 (1.7800) looks possible.

Current Level: 0.5677 (1.7614)
Resistance: 0.5800 (1.7900)
Support: 0.5585 (1.7250)
Last Weeks Range: 0.5630-0.5718 (1.7488-1.7757)

A strong US Dollar (USD) sent the Australian Dollar (AUD) packing off Monday’s open from 0.7250 falling to 0.7100 in early Wednesday sessions, suffering a double whammy of poor sentiment and yield differentials. The Aussie attempted to recover earlier setbacks bouncing higher to 0.7190 on improved risk and the hot inflation read but since drifted back to lows around 0.7120 this morning. Inflation came in at 5.1% year on year and 1.4% for Q1 as supply chain woes, energy, and housing costs balloon. This should signal the RBA to hike off 0.10% at next week’s meeting and probably again in June. US “advance” GDP prints tomorrow with expectations of growth in the first quarter 2022 predicted to be around 1.1% from the monster rise in December (4th Q) of 6.9% with slower inventory growth. Major support on the chart is 0.7000 the big figure, we are unsure if this will hold, certainly a drop below 0.6960 could signal further declines fending off the July 2020 low.

Current Level: 0.7113
Resistance: 0.7280
Support: 0.7100
Last Weeks Range: 0.7233-0.7455

The New Zealand Dollar (NZD) reached a 7-week low Monday of 0.6120 (1.6350) against the Euro (EUR) as risk conditions were poor entering the week. Stress around the fallout in the war between Ukraine and Russia remains the main driver of markets with global concerns at the forefront of everyone’s minds. Fears Russia may stop gas supplies to European countries that won’t pay Rubles has taken a heavy toll in recent sessions. The kiwi bounced back to 0.6220 (1.6070) last night but this move looks to be only a blip as “risk off” conditions could dominate moves into the weekend. Looking ahead we have NZ employment data publishing Wednesday with expectations the unemployment rate could go lower yet from the current 3.2%.

Current Level: 0.6190 (1.6155)
Resistance: 0.6250 (1.6300)
Support: 0.6135 (1.6000)
Last Weeks Range: 0.6144-0.6288 (1.5902-1.6275)

“Old Mable” (GBP) has been “offered” across the board this week, coming off 0.5150 (1.9420) Monday versus the New Zealand Dollar (NZD), recovering losses to 0.5245 (1.9070) into late Thursday sessions. This week’s “risk off” market surroundings would usually support the kiwi but with the Pound publishing awful economic data of late the kiwi has enjoyed a run of form. UK debt service and public sector wage costs have exploded as well as BoE Bailey pitching a less than hawkish tone. All eyes will be on next week’s NZ employment data with the unemployment rate expected to come in lower than the current 3.2%. Also, key Bank of England monetary policy and cash rate is Thursday with market consensus predicting the BoE raising rates from 0.75% to 1.0% with questions to be raised over their selling of QE/Bonds. With both central bank hiking in the short term, it’s tough to gauge direction or a potential break either way.

Current Level: 0.5212 (1.9185)
Resistance: 0.5255 (1.9500)
Support: 0.5130 (1.9030)
Last Weeks Range: 0.5136-0.5216 (1.9129-1.9469)

The New Zealand Dollar (NZD) retraced higher moves in early week trading against the Australian Dollar (AUD) back to 0.9240 (1.0820) as kiwi outperformed. Australian Inflation has surged again from 3.5% to 5.1% year on year surpassing market estimates of 4.6% marking the highest read since the early 2000’s and adding more pressure for the RBA to hike and hike hard. Risk off conditions backed the AUD into Thursday with prices down at 0.9175 (1.0900). Prospects that the RBA will hike next week will make it tough for the kiwi to catch a break over the next few sessions, with inflation now well above the 2-3% band, the RBA will rapidly bring in a tightening phase starting with a rise of 0.15% next week and another one in June. Also on the economic docket next week is NZ employment figures expected to be bumper and may give the NZD a push.

Current Level: 0.9178 (1.0886)
Resistance: 0.9275 (1.1000)
Support: 0.9090 (1.0780)
Last Weeks Range: 0.9092-0.9195 (1.0875-1.0998)

The New Zealand Dollar (NZD) continues to sell off against a stronger US Dollar (USD) towards pivotal support at 0.6520. Broad concerns over the war in Ukraine and consensus that the Fed will raise rates to curb rising inflation have helped the big dollar of late. Although equity markets had a better session overnight regaining some of the earlier week losses the kiwi still struggled. US Consumer Confidence released slightly down at 107.3 from the 108.5 predicted as expectations of further inflation is on everyone’s minds. US Advanced GDP is expected to print around 1.1% for Q1 compared to 6.9% in the 4th Q which may give the kiwi scope for upside moves. Next week’s calendar is action packed with NZ employment data and US Non-farm payroll releasing. Also, we have the Federal Reserve rate and policy announcement which should give us more clues as to how the Fed will continue to tighten policy. A drop below 0.6500 (Sep 2020 level)  may indicate more downside in the cross.

Current Level: 0.6531
Resistance: 0.6700
Support: 0.6520
Last Weeks Range: 0.6625-0.6813