FX Update

Key Points:

  • Interest rate hold expected from the RBNZ tomorrow.
  • Goldman Sachs expects only a 20% chance of a US recession over the next year.
  • The Federal Reserve are expected to leave their cash rate unchanged at the September meeting with cuts predicted mid-2024.
  • Chinese real estate company “Country Garden’s” share price crashed about 20% overnight reigniting the state of the economy’s recession fears.
  • NZ Business Services Index contracted from 49.6 to 47.8 in July.
  • German economic outlook is looking bleak amid a heavy manufacturing recession.
  • The US Dollar (USD) has been the strongest currency this month with the New Zealand Dollar (NZD) the worst performer.

Key Points This Week

FX Update

Key Points:

  • New Zealand food prices gained 9.6% y/y to July with fruit and Veg +6.2%, meat, poultry and fish +9.3% and non-alcoholic beverages +9.1%. Grocery prices +11.9%.
  • ANZ has revised down the farmgate milk price for the 2023/2024 season from $8.20 to $7.15.
  • NZ Manufacturing dropped in the month of July to 46.3 vs 47.5 in June, the lowest level since January 2023.
  • US July Federal deficit 221B vs 109B predicted pushing up yields and downgrading the greenback.
  • US CPI y/y printed at 3.2% vs 3.3% expected, up from 3.0% in June.
  • Recession worries are diminishing in the US in the small business sector showing optimism in growth.
  • The US Dollar (USD) has been the strongest currency this week with the New Zealand Dollar (NZD) and Japanese Yen (JPY) the worst performers.

EURO/AUD Transfer

Last week’s ECB hike still has the Euro in the driver’s seat pushing to 0.5965 (1.6760) at the close of the week against the Australian Dollar. (AUD). Monday’s action has the Aussie still on the backfoot as we head into the week with price clocking 0.5965 (1.6770) a 15-week low. It’s a light week of data which could see the pair bounce around in familiar ranges.

Current Level: 1.6742
Resistance: 1.6765
Support: 1.6260
Last Weeks Range: 1.6338 – 1.6765

AUD/EURO Transfer

Last week’s ECB hike still has the Euro in the driver’s seat pushing to 0.5965 (1.6760) at the close of the week against the Australian Dollar. (AUD). Monday’s action has the Aussie still on the backfoot as we head into the week with price clocking 0.5965 (1.6770) a 15-week low. It’s a light week of data which could see the pair bounce around in familiar ranges.

Current Level: 0.5973
Resistance: 0.6150
Support: 0.5965
Last Weeks Range: 0.5964 – 0.6120

GBP/AUD Transfer

The British Pound (GBP) extended gains Monday back to the pre- level low of 0.5140 (1.9460) against the Australian Dollar (AUD). Its thin air all the way through to 0.4940 (2.0240) on the chart as the long-term head and shoulders pattern progresses. NAB Business Confidence prints today and Friday UK quarterly GDP. The lower highs followed by lower lows should continue to dominate moves in the cross for some time.

Current Level: 1.9447
Resistance: 1.9475
Support: 1.8975
Last Weeks Range: 1.9071 – 1.9467

AUD/GBP Transfer

The British Pound (GBP) extended gains Monday back to the pre- level low of 0.5140 (1.9460) against the Australian Dollar (AUD). Its thin air all the way through to 0.4940 (2.0240) on the chart as the long-term head and shoulders pattern progresses. NAB Business Confidence prints today and Friday UK quarterly GDP. The lower highs followed by lower lows should continue to dominate moves in the cross for some time.

Current Level: 0.5142
Resistance: 0.5270
Support: 0.5135
Last Weeks Range: 0.5136 – 0.5243

AUD/USD Transfer

After falling to 0.6510 late in the week the Australian Dollar (AUD) recovered towards 0.6600 at the close against the US Dollar (USD). The cross looks to be consolidating where it is the cross trading around 0.6570 Monday despite a pick-up in risk appetite. Looking ahead we have a quiet week on the docket until Friday’s US CPI data releases. The recent spike in US yields have given the greenback a lift however the real moves will be based on where CPI prints. Expectations are for a rise to 3.3% from 3.0% y/y which won’t be welcomed by the Fed.

Current Level: 0.6573
Resistance: 0.6890
Support: 0.6530
Last Weeks Range: 0.6512 – 0.6739

EURO/NZD Transfer

The New Zealand Dollar (NZD) remains “offered” into Monday against the Euro with price just a touch lower on the open at 0.5540 (1.8050). Although risk appetite has improved with equity markets recovering it’s unusual to not have seen a reversal of sorts from the kiwi. New Zealand Inflation expectations for the third quarter releases Wednesday which should give clues as to whether we might see a shift in monetary policy from the RBNZ and hold or consider another hike? We don’t see any shifts outside the long-term bear channel happening this week with price likely to trickle lower.

Current Level: 1.8027
Resistance: 1.8050
Support: 1.7545
Last Weeks Range: 1.7670 – 1.8068

NZD/EURO Transfer

The New Zealand Dollar (NZD) remains “offered” into Monday against the Euro with price just a touch lower on the open at 0.5540 (1.8050). Although risk appetite has improved with equity markets recovering it’s unusual to not have seen a reversal of sorts from the kiwi. New Zealand Inflation expectations for the third quarter releases Wednesday which should give clues as to whether we might see a shift in monetary policy from the RBNZ and hold or consider another hike? We don’t see any shifts outside the long-term bear channel happening this week with price likely to trickle lower.

Current Level: 0.5547
Resistance: 0.5700
Support: 0.5540
Last Weeks Range: 0.5534 – 0.5659

GBP/NZD Transfer

The British Pound (GBP) continue to climb against the New Zealand Dollar (NZD) Monday to meet the earlier low of 0.4775 (2.0940). Risk markets were a little subdued giving the GBP further momentum. A break clear of 0.4760 (2.10) would certainly signal further downside for the kiwi, the next target support is 0.4670 (2.1400), the pre-Brexit low of June 2016. Looking ahead we have NZ inflation expectations tomorrow and UK GDP Friday.

Current Level: 2.0942
Resistance: 2.0965
Support: 2.0510
Last Weeks Range: 2.0623 – 2.0958