currency

FX Update

Key Points:

• The Reserve Bank of New Zealand holds interest rates at 5.50%
• Japanese “core-core” inflation – (excluding food and energy) rises to 4.3%
• Gold has fallen to the lowest level since March- 1980 per ounce.
• Chinese Industrial production released down on expectations in the second quarter, with domestic indicators like real estate and demand for exports also taking hits.
• The US 30-year bond traded to 4.42% overnight breaking above last year’s high and matching 2011 levels. This is starting to weigh on equity markets with US indices all coming off recent highs.
• The British Pound (GBP) has been the strongest currency this week with the Australian Dollar (AUD) the worst performer.

The New Zealand Dollar (NZD) continued its downward spiral late last week reaching 0.5980 closing below key support at the big figure- 0.6000 against the US Dollar (USD). Monday’s action has extended moves to the downside clocking 0.5950 in early Tuesday. To be honest, the kiwi looks “down for the count” at the moment trading into thin air through 0.6000 was a major signal we could see bigger moves into the 0.50’s. It’s a busy week of releases for the pair with a slew of data to publish. The RBNZ official cash rate is expected to hold rates at 5.50% followed by Fed minutes Thursday. At some point the NZD will bounce higher, buyers of USD should grab the spikes.

Current Level: 0.5974
Resistance: 0.6360
Support: 0.5930
Last Weeks Range: 0.5974 – 0.6117

Mid last week, prices in the Euro (EUR), Australian Dollar (AUD) cross fell through long term support at 0.5960 (1.6780) to reach 0.5930 (1.6860) at the close. Trading into Monday extended this run to 0.5910 (1.6930) before reversing to 0.5950 (1.6815) early Tuesday. If we look back 1 year on the chart to August 2022 we see a familiar pattern of lower highs followed by lower lows constantly repeating. Looking ahead we see Australian employment data Thursday with unemployment expected to tick higher from 3.6%.

Current Level: 1.6815
Resistance: 1.7200
Support: 1.6650
Last Weeks Range: 1.6685 – 1.6884

Mid last week, prices in the Euro (EUR), Australian Dollar (AUD) cross fell through long term support at 0.5960 (1.6780) to reach 0.5930 (1.6860) at the close. Trading into Monday extended this run to 0.5910 (1.6930) before reversing to 0.5950 (1.6815) early Tuesday. If we look back 1 year on the chart to August 2022 we see a familiar pattern of lower highs followed by lower lows constantly repeating. Looking ahead we see Australian employment data Thursday with unemployment expected to tick higher from 3.6%.

Current Level: 0.5947
Resistance: 0.6000
Support: 0.5815
Last Weeks Range: 0.5922 – 0.5993

The Australian Dollar (AUD) came under pressure late in the week reversing early week gains from 0.5160 (1.9370) to close out the week at 0.5115 (1.9550). We are in our 5th week straight of lower highs and lower lows in the cross as the pair reaches an April 2020 low Monday extending declines. UK GDP printed at 0.5% in June vs 0.2% expected, up from May’s 0.1% showing promising growth led by industrial production. Today’s RBA minutes should give us more clues as to policy guidance and if the RBA has finished hiking. UK CPI y/y Thursday should print around a percent lower at 6.8%, certainly the release will define future interest moves. We expect further declines in the AUD this week.

Current Level: 1.9554
Resistance: 2.0200
Support: 1.9160
Last Weeks Range: 1.9330 – 1.9561

The Australian Dollar (AUD) came under pressure late in the week reversing early week gains from 0.5160 (1.9370) to close out the week at 0.5115 (1.9550). We are in our 5th week straight of lower highs and lower lows in the cross as the pair reaches an April 2020 low Monday extending declines. UK GDP printed at 0.5% in June vs 0.2% expected, up from May’s 0.1% showing promising growth led by industrial production. Today’s RBA minutes should give us more clues as to policy guidance and if the RBA has finished hiking. UK CPI y/y Thursday should print around a percent lower at 6.8%, certainly the release will define future interest moves. We expect further declines in the AUD this week.

Current Level: 0.5114
Resistance: 0.5220
Support: 0.4950
Last Weeks Range: 0.5112 – 0.5173

The Australian Dollar (AUD) dropped through prior support at 0.6460 this morning against the USD Dollar (USD) extending last week’s slump from 0.6615 to reach 0.6450. This can go one of two ways… the AUD/USD could post a daily close below 0.6450 signalling further declines or we could see a recovery from the AUD of sorts and a bounce back to retest the 0.6550 area. RBA minutes later today should give us clues along with FOMC minutes later in the week. Also, of note Aussie wage price data Thursday should reflect a softening in employment.

Current Level: 0.6485
Resistance: 0.6890
Support: 0.6450
Last Weeks Range: 0.6486 – 0.6616

The New Zealand Dollar (NZD) fell another leg last week dropping to 0.5465 (1.8300) against the Euro (EUR) straight through heavy support at 0.5540 (1.8060) registering a fresh April 2020 level. Setback this week in a thin calendar won’t be to supported, the long term bear channel formation should hold up representing a softer kiwi. The RBNZ releases the official cash rate tomorrow, widely expected to remain at 5.5% for some time with recent interest rate increases impacting into household spending habits.

Current Level: 1.8278
Resistance: 1.8470
Support: 1.7825
Last Weeks Range: 1.7977 – 1.8327

The New Zealand Dollar (NZD) fell another leg last week dropping to 0.5465 (1.8300) against the Euro (EUR) straight through heavy support at 0.5540 (1.8060) registering a fresh April 2020 level. Setback this week in a thin calendar won’t be to supported, the long term bear channel formation should hold up representing a softer kiwi. The RBNZ releases the official cash rate tomorrow, widely expected to remain at 5.5% for some time with recent interest rate increases impacting into household spending habits.

Current Level: 0.5471
Resistance: 0.5610
Support: 0.5415
Last Weeks Range: 0.5456 – 0.5562

The New Zealand Dollar (NZD) remains under pressure against the British Pound (GBP) falling to a long-term low of 0.4715 (2.1220), not seen since March 2020. The GBP outperformed late in the week on better-than-expected economic data- GDP for June came in at 0.5% vs 0.2% showing the economy is growing faster than predicted. This week we have the RBNZ rate announcement which is widely predicted to stay on hold at 5.5% for now through to mid-2024. Later in the week UK CPI y/y prints with expectations inflation should drop to around 6.7%. This in turn is key to determining how much the Bank of England (BoE) will hike at its meeting on September 21st. It’s hard to see the kiwi bouncing back any time soon.

Current Level: 2.1253
Resistance: 2.1420
Support: 2.0900
Last Weeks Range: 2.0842 – 2.1231