EUR

After a week of recovering losses by the New Zealand Dollar (NZD) to 0.9235 (1.0830) Monday’s action has seen the kiwi give back gains to 0.9200 (1.0870) the AUD looking to regain momentum from early August’s 0.9320 (1.0730). Late this week we have the only tier one data- Australian employment data. Unemployment is predicted to remain around 3.7% with the change in the employed expected to rise in August, something the RBA will be cautious of, a direct correlation with higher inflation. A retest of 0.9160 (1.0920) looks the bet this week.

Current Level: 0.9193
Resistance: 0.9300
Support: 0.9150
Last Weeks Range: 0.9188 – 0.9239

Currencies recovered Monday against the US Dollar (USD) with the greenback sold off in bulk. This is directly correlated to the sharp turnaround of the Yen. The kiwi surged to 0.5935 from 0.5880 post the open and has consolidated around the 0.5920 mark into Tuesday. The key release this week is US CPI with analysts suggesting it could go higher from 3.2% y/y to 3.6%, consensus is if this happens we could see the Fed raise rates in November. With the cross trading at the top of the bear channel this represents decent buy opportunities.

Current Level: 0.5910
Resistance: 0.6380
Support: 0.5850
Last Weeks Range: 0.5857 – 0.5959

Market Overview

• The division between the US economy and the rest of the developed world is widening. The global growth gap sees the US expanding at a rate of 6.0% per year. In comparison- global growth has declined in the first part of the year continuing the downtrend which started last year. The world’s biggest economies are now well behind the US and India.
• The US Govt is close to approving “longer” range missiles packed with cluster bombs for Ukraine.
• North Korea’s Kim Jong Un will visit Russia over the coming days.
• Chinese August inflation 0.1% y/y vs expected 0.2%
• Canadian Unemployment dipped to 5.5% from 5.6% for August with the job’s number surprising markets coming in at 39,000 vs 19,000 expected highlighting a rebound from transitory times.
• The US Dollar (USD) has easily been the strongest currency this month with the British Pound (GBP) the worst performing currency

A stronger greenback based on yield differentials has the New Zealand Dollar (NZD) underwater, weighed down by broad risk off flows and global sentiment. The kiwi clocked fresh lows over the week to 0.5855 areas with the Federal Reserve maintaining a dovish stance in a backdrop of recession speak. Fundamentally, we don’t expect the kiwi to hold ground for much longer before a much deeper move eventuates. Key standouts next week come in the form of US CPI y/y and Retail Sales. Anything north of 3.2% inflation could drag down the NZD.

The current interbank midrate is: NZDUSD 0.5882

The interbank range this week has been: NZDUSD 0.5857- 0.5960

The New Zealand Dollar (NZD), Australian Dollar (AUD) is still pivoting around 0.9210 (1.0860) as the cross closes another week of range bound action. The RBA kept rates on hold at 4.10% Tuesday, the third month running but reiterated they will keep options open for the possibility they may need to hike down the track if inflation and wages remain stubborn over the second part of the year. Certainly, next week’s Aussie employment data will give us more clues as to what we could expect. Also of note were comments from the RBA that China was entering a period of downturn which could transpire into less raw materials being required from Australian mining. This could rub off on exports/inflation and AUD ahead.

The current interbank midrate is: NZDAUD 0.9218     AUDNZD 1.0836

The interbank range this week has been: NZDAUD 0.9188- 0.9233    AUDNZD 1.0830- 1.0883

Market Overview:

• European inflation came in at 0.1% for the second quarter of 2023 revised lower than the initial 0.3% following a rise of 0.1% in the previous quarter.
• The Bank of Canada left rates unchanged overnight at 5.0%, the Bank of Canada is expected to hold through to year end.
• Poland’s central bank has cut interest rates from 6.75% to 6.0% vs 0.25% expected.
• Bank of England’s Bailey is tipping for reasonable falls to inflation as the labour market continues to ease.
• Chinese August trade data -8.8% y/y vs expected -9.2%as China industry struggles.
• Chinese “Purchasing Managers Index” PMI prints well down at 51.8 vs 53.6 forecast – 54.1 previous.
• Goldman Sachs is predicting rate cuts for the Federal Reserve starting second quarter 2024. However, the chances of a hike at the Sep 21 meeting are now at 50/50.
• The US Dollar (USD) has been the strongest currency this week with Australian Dollar (AUD) the worst performing currency.

Prices in the Euro (EUR), Australian Dollar (AUD) extended last week’s run Monday reaching 0.6005 (1.6650) a 5-week high, before reversing into morning trade to 0.5985 (1.6700). German Trade Balance was down 0.9% from June to July, lower than expected at 15.9B compared to 17.6B highlighting a struggling economy. Today’s RBA cash rate release should reflect no change to 4.10% as their tightening campaign to slow inflation looks to be working. Also of interest on the calendar is Australian GDP for the June quarter predicted to come in at 0.3% up from first quarters 0.2%. Downside moves in the pair could restore this week.

Current Level: 1.6716
Resistance: 1.7065
Support: 1.6665
Last Weeks Range: 1.6672 – 1.6878

The Australian Dollar (AUD) clocked a fresh 6 week high of 0.6007 (1.6645) against the Euro (EUR) but couldn’t hold here dropping back to 0.5980 (1.6715), clearly the cross is not ready to make a move above the key 0.6000 level just yet. Chances of the ECB raising rates this Thursday from the current 4.25% have eased to around 40% from mid August’s 60%. We see chances of a hike in the 4th quarter at 70% depending on how CPI prints. Expectations are for decent drops in both September and October. Direction this week in the cross will mostly come from the ECB.

Current Level: 0.5981
Resistance: 0.6110
Support: 0.5860
Last Weeks Range: 0.5919- 0.6006

The Australian Dollar (AUD) closed slightly up on the British Pound (GBP) for the week at the 0.5130 (1.9500) area compared to 0.5100 (1.9620) last week as market moving economic data was non-existent. US employment data was down on expectations Friday helping to boost the Aussie into the close, however apart from this we had very few shifts. The UK economy still has upward pressures on inflation – the highest in the G10, a September 21 hike is not a given at this stage, but chances are the Bank of England may rise from 5.25%. Looking at this week’s docket we have the RBA tomorrow with no change from 4.1% expected.

Current Level: 1.9561
Resistance: 2.0000
Support: 1.9420
Last Weeks Range: 1.9478 – 1.9651

The New Zealand Dollar (NZD) is a little weaker off Monday’s open against the Euro (EUR) dropping to 0.5500 (1.8180) this morning as risk sentiment erodes. German Trade Balance came in light overnight printing at 15.9B compared to 17.6B predicted showing the country’s economy continues to waiver. A very thin calendar of events this week could see the EUR gather pace on a fundamental level.

Current Level: 1.8185
Resistance: 1.8485
Support: 1.8050
Last Weeks Range: 1.8081 – 1.8376