JPY

Market Overview

Key Points:

• New Zealand has shifted right as the outgoing Labour Party is hammered as preliminary votes in the 2023 Elections are in, this ends 6 years of Labour Party rule. The new Prime Minister Chris Luxon saying- “people had voted for change”.
• Planned Israeli attacks on Gaza have been delayed.
• Consensus has turned positive in the United States as a looming recession may not be on the cards. The Fed is done raising rates and inflation will continue to soften. Strong labour markets and rising incomes support consumer demand which in turn are fuelling economic growth. Most analysts predict the Fed will start cutting rates in the second half of next year as GDP eases and the unemployment rate rises to potentially 4.4% from 3.8% now.
• The ECB will keep interest rates high for a prolonged period to get inflation back to 2.0%
• NZ CPI third quarter 2023 dips to 5.6% y/y from 6.0% with the largest contributor being food.
• The US Dollar (USD) has been the strongest currency in the past week while the New Zealand Dollar (NZD) has been the worst performer.

The New Zealand Dollar (NZD) fell back to 0.9355 (1.0690) midweek against the Australian Dollar (AUD) but regained the edge into Friday clawing back losses to 0.9400 (1.0635). NZ Election tomorrow could excite the cross on next week’s open, a National led govt should spike the kiwi, anything else including adding Winston into the mix and the kiwi could weaken considerably purely on uncertainty. Technically resistance looks decent at 0.9460 the close of late May, with downside moves limited to 0.9320 (1.0730) for now. Looking ahead we have NZ CPI q/q and Australian unemployment data printing.

The current interbank midrate is: NZDAUD 0.9372 AUDNZD 1.0662

The interbank range this week has been: NZDAUD 0.9354- 0.9425 AUDNZD 1.0609- 1.0690

As we predicted the New Zealand Dollar (NZD) hasn’t been able to hold above 0.6000, reversing lower over 1 cent against the US Dollar (USD) in overnight trading back to 0.5930. US CPI y/y for September came in hot at 3.7% vs 3.6% expected, rallying the greenback hard against most crosses. The rebound in inflationary pressures confirmed with some suggesting earlier it was a short-term gig. Markets reacted by sending treasury yields higher, the US Dollar index was up nearly 1% while US equities slumped by similar margins. The upshot is, this may strengthen chances of the Fed raising rates at their 2 Nov meeting, it would be a bold move. With the pair trading below the 100-day moving average we may see further weakening in the kiwi.

The current interbank midrate is: NZDUSD 0.5920

The interbank range this week has been: NZDUSD 0.5918- 0.6054

The Australian Dollar (AUD) has reversed off resistance at 0.6010 (1.6640) at the end of the week slipping back into the bull channel seen over the past 8 weeks against the Euro (EUR). The uptick seen could however be limited to the 0.6135 (1.6300) zone as geopolitical tensions heat up in the Gaza Strip. Certainly, with a lack of meaningful data publishing in the pair global uncertainty could dominate.

Current Level: 1.6479
Resistance: 1.7000
Support: 1.6260
Last Weeks Range: 1.6392 – 1.6641

The Australian Dollar (AUD) has reversed off resistance at 0.6010 (1.6640) at the end of the week slipping back into the bull channel seen over the past 8 weeks against the Euro (EUR). The uptick seen could however be limited to the 0.6135 (1.6300) zone as geopolitical tensions heat up in the Gaza Strip. Certainly, with a lack of meaningful data publishing in the pair global uncertainty could dominate.

Current Level: 0.6068
Resistance: 0.6150
Support: 0.5880
Last Weeks Range: 0.6009 – 0.6100

We were bang on with our predictions last week with movement in the British Pound (GBP), Australian Dollar (AUD) with price easing lower off 0.5250 (1.9050) to 0.5220 (1.9160) at the close of the week. Despite geopolitical news in the cross dampening the mood in markets the Aussie has ignored the brief shifting higher on a risk/equity rally to 0.5245 (1.9070) Tuesday. A move above 0.5250 (1.9050) would signal further upside. We think the likelihood is low with consideration of the geopolitical scene.

Current Level: 1.9080
Resistance: 1.9700
Support: 1.8900
Last Weeks Range: 1.8923 – 1.9221

The New Zealand Dollar (NZD) has largely ignored global tensions developing in the Gaza strip. Monday’s risk markets held the power, the kiwi rallying to 0.5700 (1.7540) this morning from 0.5655 (1.7680) against the Euro (EUR) as US Equities closed up 0.6% in overnight trading. This equals a 12-week high in the cross. Upside moves this week are looking fairly exhausted extending to 0.5715 (1.7500) when considering offshore risks developing.

Current Level: 1.7543
Resistance: 1.8400
Support: 1.7390
Last Weeks Range: 1.7582 – 1.7821

The New Zealand Dollar (NZD) has largely ignored global tensions developing in the Gaza strip. Monday’s risk markets held the power, the kiwi rallying to 0.5700 (1.7540) this morning from 0.5655 (1.7680) against the Euro (EUR) as US Equities closed up 0.6% in overnight trading. This equals a 12-week high in the cross. Upside moves this week are looking fairly exhausted extending to 0.5715 (1.7500) when considering offshore risks developing.

Current Level: 0.5700
Support: 0.5750
Resistance: 0.5435
Last week’s range: 0.5611 – 0.5687

The New Zealand Dollar (NZD) has pushed past resistance at 0.4900 (2.0400) against the British Pound (GBP) Monday on its way to clock 0.4920 (2.0320) as we head into Tuesday trading. A move through 0.4935 (2.0270) could signal further support in the kiwi all the way to 2/1 (0.5000). With the British economy now slowing based on rising interest rates having an effect on the economy, employment is expected to also rise thus we see further hikes from the Bank of England unlikely. With predicted rises in NZ inflation this has opened the door for another RBNZ hike and upside for the NZD.

Current Level: 2.0308
Resistance: 2.1390
Support: 2.000
Last Weeks Range: 2.0287- 2.0583

The New Zealand Dollar (NZD) has pushed past resistance at 0.4900 (2.0400) against the British Pound (GBP) Monday on its way to clock 0.4920 (2.0320) as we head into Tuesday trading. A move through 0.4935 (2.0270) could signal further support in the kiwi all the way to 2/1 (0.5000). With the British economy now slowing based on rising interest rates having an effect on the economy, employment is expected to also rise thus we see further hikes from the Bank of England unlikely. With predicted rises in NZ inflation this has opened the door for another RBNZ hike and upside for the NZD.

Current Level: 0.4924
Resistance: 0.5000
Support: 0.4675
Last Weeks Range: 0.4858 – 0.4930