Prices in the Euro (EUR), Australian Dollar (AUD) sit around the weekly open at 0.6620 (1.5100) areas into Tuesday after with risk currencies a little more supported in recent sessions. The Eurozone fallout from the energy shortage came back into focus meanwhile the CPI forecast was revised to 8.1% questioning ECB policy. Lagarde spoke overnight confirming her intentions to raise their benchmark rate 25 points in July and that they were still working on anti-fragmentation tool. This will enable them to raise rates and bring down decelerate inflation back to their 2.0% target. The RBA minutes release later today and should focus on rising inflation. We think the recent trend movement from the high of 0.6780 (1.4750) will continue this week towards 0.6530 (1.5320) support.
Current Level: 0.6616 (1.5114)
Resistance: 0.6775 (1.5320)
Support: 0.6530 (1.4760)
Last Weeks Range: 0.6584-0.6729 (1.4861-1.5188)
Early week wobbles in the British Pound (GBP) were replaced with underperforming risk currencies with the Australian Dollar (AUD) on the back foot. Price extended to 0.5675 (1.7620) just shy of the fortnight low with the currency looking at lengthening out. This week’s RBA minutes later today should be more of the same rhetoric of how the economy plans to bring down rising inflation. Governor Lowe expects inflation to peak around 7.0% by the end the year. Expectations are for another rise to their cash rate of 50 points at their July and August meeting. UK inflation prints tomorrow and is predicted to reflect further squeezes to consumer prices and 9.1% untick. It wouldn’t surprise us if we saw the 3 month daily low tested at 0.5620 (1.7800) this week if markets remain risk averse.
Current Level: 0.5673 (1.7627)
Resistance: 0.5780 (1.7820)
Support: 0.5610 (1.7300)
Last Weeks Range: 0.5663-0.5778 (1.7307-1.7658)
Improvement in stocks Monday took the US Dollar (USD), Australian Dollar (AUD) to just shy of 0.7000 briefly before falling lower to 0.6960 as the DOW index ended the day flat. Greenback weakness from last week’s fallout from the Fed raising rates to 1.75% is evident highlighting slower growth prospects on the horizon. The result of guidance suggested at 50-75 points in July and two more large increases before the end of the year will inevitably stifle job’s data and downgrade growth. The big story has been iron ore- down from last week’s 146 per ton to 125 this morning in light of Chinese covid lockdown fears and weaker steel production due to softer margins. The price of rebar has been hit hard down 9% signalling construction has slowed due to sharp covid restrictions. On the calendar we have RBA’s Lowe’s minutes of the June 7th policy meeting and Fed chair Powell testifying Thursday. For those looking at buying USD- roadblock resistance on the chart around 0.7060 will be tough to breach.
Current Level: 0.6957
Last Weeks Range: 0.6848-0.7066
A quiet start to the week in the New Zealand (NZD), Euro (EUR) cross saw price drift around 0.6035 (1.6570) levels into Tuesday with a slight improvement in the EUR developing. Lagarde spoke overnight about her hiking plans and how the war in the Ukraine means the Euro economic area is still under mass uncertainty . She made her intentions clear to hike rates in July and September. The new anti-fragmentation tool should assist in allowing them to hike rates with the ultimate goal of bringing down inflation back to their 2.0% target. We predict the kiwi to struggle over the next few days driven by risk sentiment. On the calendar this week we have Eurozone production output and German producer prices.
Current Level: 0.6015 (1.6625)
Resistance: 0.6105 (1.6850)
Support: 0.5935 (1.6380)
Last Weeks Range: 0.5934-0.6060 (1.6501-1.6851)
Markets were relaxed Monday over the US holiday, The British Pound (GBP) remains in its recent range trading around the 0.5170 ( 1.9340) areas this morning. Momentum tracked ever so slightly with the GBP as risk currencies took a breather. Last week’s rise of 25 points to 1.25% by the Bank of England should continue to support the Pound heading into tomorrow’s UK CPI read which is predicted to rise from 9.0% to 9.1% y/y. One source expects inflation to tick above 10.0%. Retail Sales in the UK releases at the end of the week and should reflect a difficult period for consumers with the number predicted to be around -0.6%. A retest of 0.5090 (1.9650) the 3 months daily high, looks the pick for direction this week.
Current Level: 0.5163 (1.9368)
Resistance: 0.5230 (1.9630)
Support: 0.5095 (1.9630)
Last Weeks Range: 0.5126-0.5195 (1.9249-1.9508)
The New Zealand Dollar (NZD) extended gains Monday against the Australian Dollar (AUD) to the 0.9140 (1.0940) level but was unable to stick around dropping back to 0.9110 (1.0980) the weekly opening area. The key psychological level at 0.9100 could come under pressure today when the RBA minutes are read by Governor Lowe, saying recently the central bank will do everything they can to bring down inflation back to reasonable levels which he predicts could be as high as 7.0% by year end. Commodity markets are back under pressure and Iron Ore has come off 146 over the last few days, trading down to 125 this morning as renewed covid fears in China sparked fresh concerns of further lockdowns. With a national holiday Friday in NZ with Matariki the cross shouldn’t deviate much from current levels.
Current Level: 0.9102 (1.0977)
Resistance: 0.9150 (1.1160)
Support: 0.8960 (1.0930)
Last Weeks Range: 0.8955-0.9108 (1.0979-1.1166)
Risk sentiment improved Monday with the New Zealand Dollar (NZD) pushing to 0.6360 levels against the US Dollar (USD) before falling back this morning to 0.6330 after selling took place. Equity markets were buoyant recovering from last week’s drops but closed the day flat as the US broke for the Juneteenth holiday. Moves to the topside for the kiwi remain limited fundamentally – on the chart we see resistance at 0.6380 the 50% fib area stemming from the recent low at 0.6200 and 0.6550. It’s now predicted that the US economy will encounter a recession over the next 12 months which could spill over onto the UK and Eurozone and other countries. The cost-of-living crisis and the scary effects from rising inflation causing soaring energy costs will almost make things worse over the coming months. It’s certainly a race to the recession start line, remembering the NZ economy already clocked negative growth in the first quarter of 2022. Key data comes in the form of US Manufacturing later in the week. Buyers of the big dollar should consider the recent rise in the cross above 0.6300.
Current Level: 0.6331
Last Weeks Range: 0.6192-0.6395
All Day, USD, Bank Holiday
12PM, AUD, RBA Gov Lowe Speaks
1:30PM, AUD, Monetary Policy Meeting Minutes
12:30AM, CAD, Core Retail Sales m/m
6:00PM, GBP, CPI y/y
Previous: 9.00% Read more
Markets seemed a little annoyed at the Bank of England’s 25 point hike this morning with the view this should have been more. The central bank remains cautious ahead of an economy struggling. The Bank of England (BoE) hiked their cash rate from 1.0% to 1.25% which rallied the GBP post release to 0.5665 (1.7650), it couldn’t consolidate around these levels spilling back to 0.5707 (1.7520). With the UK leading the recession race with the outlook uncertain one gets the impression the central bank is holding back on bigger hikes in light of economic weakness wary of not sending the economy to a howling halt. Aussie job numbers pushed a little higher with the participation rate at 66.7% and the unemployment rate remaining at 3.9%, the labour market remains tight. Key data out next week comes in the form of UK CPI, sitting at 9.0% I’m not sure they can afford this to go much higher.
The current interbank midrate is: AUDGBP 0.5697 GBPAUD 1.7553
The interbank range this week has been: AUDGBP 0.5663- 0.5777 GBPAUD 1.7308- 1.7658
The Euro (EUR), Australian Dollar (AUD) looks like an earthquake seismic chart this week with large swings taking place. Price settled into Friday around 1.4950 with strength back in the Euro with equities coming off overnight- the Nasdaq down over 4.0% at the close of NY. The ECB’s new “anti-fragmentation tool” announced midweek should pave the way for more aggressive tightening hikes later in the year. The tool will give more certainty with predictions of a hike of 25 points in July, 50 points in September, October, and November to cap somewhere around the 1.25% area by the end of 2022. Australian jobs numbers were solid at 60,000 people added to the workforce in May with the unemployment rate staying at 3.9%. We still support upside bias in the short to medium term for the Euro.
The current interbank midrate is: AUDEUR 0.6664 EURAUD 1.5003
The interbank range this week has been: AUDEUR 0.6584- 0.6730 EURAUD 1.4858- 1.5188