FX News

The RBA’s pause in interest rate rises, has added to the downward momentum of the currency, along with recessionary pressures hitting commodity demand and prices. This week’s inflation number, out in the USA, will be a big directional driver of the AUD, this coming week. The expected rebound in the post-COVID Chinese economy, has been restrained and the Chinese trade numbers, set to be released Thursday, will have an impact.

Current Level: 0.6682
Resistance: 0.6715
Support: 0.6610
Last Weeks Range: 0.6630-0.6705

ECB President LeGarde has been extremely hawkish in monetary policy, with the mantra, ‘higher for longer’. The ECB have been way behind on the yield curve, acting on inflation very late in the game, which gives them some latitude for further rate rises. Recessionary conditions in Europe prevail and put a brake on interest rates and the currency.

Current level: 0.5645 (1.7715)
Resistance: 0.5695 (1.7560)
Support: 0.5595 (1.7873)
Last Weeks Range: 0.5610-0.5665 (1.7825-1.7652)

UK inflation is the highest of the Western economies and therefore pushes the Bank of England to continue to raise rates, which adds to support for the GBP. The cross rate has been relatively static, but any increase in the interest rate differential, between the two currencies, could change the direction of the cross rate.

Current Level: 0.4829 (2.0708)
Resistance: 0.4890 (2.0450)
Support: 0.4790 (2.0877)
Last Weeks Range: 0.4820-0.4885 (2.0746-2.0470)

The RBA surprised many, by pausing rate rises, adding downward pressure to the AUD currency. The NZD/AUD consequently had further upward momentum, rising to 0.9300. The RBNZ monetary policy decision tomorrow, will set the direction of the cross rate, over the next week. A surprise rise will only add to the KIWI strength.

Current Level: 0.9301 (1.0751)
Resistance: 0.9345 (1.0700)
Support: 0.9210 (1.0858)
Last Weeks Range: 0.9220-0.9285 (1.0845-1.0770)

The RBNZ Rate Decision is scheduled for Wednesday and they are expected to follow the RBA and Federal Reserve, hitting the rate rise ‘pause button’. Inflation has been tumbling lower across Europe, but remains stubbornly high in Germany, while Core inflation has been persistent in the USA. NZ Inflation has been very high and cost of living pressures must add to pressure on the RBNZ to tame inflation. Raising rates hits the consumer hard, through mortgage rates, so therein lies the problem. The RBNZ is ‘caught between a rock and a hard place’. The NZD is trading around 0.6200 in the lead up to the RBNZ decision.

Current Level: 0.6213
Resistance: 0.6230
Support: 0.6110
Last Weeks Range: 0.6120-0.6205

Monday July 10
1:30pm CNY CPI y/y
Forecast: 0.20%
Previous: 0.20%
1:30pm CNY PPI y/y
Forecast: -5.00%
Previous: -4.60%

Tuesday July 11
3:00am GBP BOE Gov Bailey Speaks
1:30pm AUD NAB Business Confidence
Previous: -4
6:00pm GBP Claimant Count Change
Forecast: 20.5K
Previous: -13.6K
6:00pm GBP Average Earnings Index 3m/y
Forecast: 6.80%
Previous: 6.50%
9:00pm EUR German ZEW Economic Sentiment
Forecast:-10.7
Previous: -8.5
11th-15th CNY New Loans
Forecast: 2300B
Previous: 1360B Read more

The ECB remains firmly committed to their ongoing hawkish monetary policy, with the mantra, ‘higher for longer’. The Central Bank has some latitude, as their rates trade at a severe discount, to the UK and USA. PMI data in Europe has been extremely weak and reflects the recessionary economic conditions, as softer energy prices aid their economic recovery.

Current Level: 0.6083 (1.6440)
Resistance: 0.6170 (1.6210)
Support: 0.6025 (1.66)
Last Weeks Range: 0.6050-0.6140 (1.6530-1.6290)

The Bank of England remains firmly committed to stamping out inflation, which is the highest in all major Western economies. This has ensured that upward pressure on interest rates supports the GBP. The reserve currency is receiving support from US economic data, so that will balance British currency volatility.

Current Level: 0.5200 (1.9230)
Resistance: 0.5290 (1.8905)
Support: 0.5175 (1.9325)
Last Weeks Range: 0.5180-0.5260 (1.9305-1.9000)

The RBA hit the monetary ‘pause button’ and left rates unchanged. This surprised many pundits, but aped the Federal Reserve, in their recent monetary decision. This is a result of extreme political pressure, rather than any statistical relief on the inflation front. The Fed minutes indicated that rates would continue to rise in the USA and the latest labour markets reports, from the US, only add to the likelihood. The AUD has plunged, from above 0.6700, back to 0.6600, with downside pressure prevalent.

Current Level: 0.5200 (1.9230)
Resistance: 0.5290 (1.8905)
Support: 0.5175 (1.9325)
Last Weeks Range: 0.5180-0.5260 (1.9305-1.9000)

European PMI data was weaker than expected and spread from manufacturing to the services sectors. This reflects widespread recessionary pressures, from slower demand and tighter monetary conditions. The ECB has assured markets that they are firmly committed to their ‘hawkish’ monetary policy cycle, and this has helped support the EURO. The surprise strength in the US labour market only reinforces tight monetary conditions and the mantra, ‘higher for longer’, espoused by ECB President LeGarde.

Current Level:0.5653 (1.7690)
Resistance: 0.5705 (1.7530)
Support: 0.5590 (1.7890)
Last Weeks Range: 0.5600-0.5685 (1.7860-1.7590)