NZD

Tuesday’s RBA interest rate remained unchanged at 4.35% with the RBA a little less hawkish than we were expecting. Prices in the Australian Dollar (AUD), New Zealand Dollar (NZD) ticked higher from 0.9075 (1.1020) to reach 0.9132 (1.0950) early Friday. The RBA will leave interest rates on hold until at least year end with inflation forecasted to be around 2.8% late 2025. If we compare this to NZ inflation forecast which are falling faster its clear to see divergence starting to affect the NZD/AUD. We will get a closer look next week at NZ Inflation Expectations q/q. We are not convinced just yet we have seen the low at 0.9065 (1.1030) in the rear-view mirror, certainly if price breaks 0.9140 (1.0940) we could see further rises for the kiwi.

The current interbank midrate is: NZDAUD 0.9121 AUDNZD 1.0959

The interbank range this week has been: NZDAUD 0.9067- 0.9134 AUDNZD 1.0947- 1.1029

The New Zealand Dollar (NZD) eased back below 0.6000 to 0.5980 midweek but has recovered against the US Dollar (USD) into early Friday to 0.6035 as risk and equity markets improved. US Core inflation holds the key to the Fed interest rate moves on the horizon, key to keeping interest rate cuts on the table over the next few months CPI will need to shift lower in next week’s report. Currently this is 0.4% with expectations of a read of 0.3%. This will move the yearly inflation number from 3.5% to 3.4%. The cross now eyes last week’s prior top at 0.6046 and past this point the 8-week high of 0.6105. We think with central bank divergence will start to play a bigger part over the next few months, we may have seen the last of the yearly low levels around 0.5850.

The current interbank midrate is: NZDUSD 0.6035

The interbank range this week has been: NZDUSD 0.5980- 0.6039

The Australian Dollar (AUD) held the 0.6155 (1.6250) level Monday after breaking through prior resistance at 0.6135 (1.6300) Friday after risk mood bought back buyers of AUD. At a fresh early January 2024 level, the AUD now targets the yearly open at 0.6185 (1.6170). Monday’s Eurozone PMI read came in higher printing at 53.3 vs 52.9 in April with European Retail Sales due later today with a rebound off March’s -0.5% decline to 0.6% expected.

Current Level: 1.6265
Resistance: 1.6500
Support: 1.6160
Last Weeks Range: 1.6229- 1.6495

The Australian Dollar (AUD) held the 0.6155 (1.6250) level Monday after breaking through prior resistance at 0.6135 (1.6300) Friday after risk mood bought back buyers of AUD. At a fresh early January 2024 level, the AUD now targets the yearly open at 0.6185 (1.6170). Monday’s Eurozone PMI read came in higher printing at 53.3 vs 52.9 in April with European Retail Sales due later today with a rebound off March’s -0.5% decline to 0.6% expected.

Current Level: 0.6148
Resistance: 0.6190
Support: 0.6060
Last Weeks Range: 0.6062- 0.6161

This week’s main attraction is a double header of central bank action with the Bank of England (BoE) and the Reserve Bank of Australia (RBA) both releasing policy statements and cash rates. The Aussie kicked back from 0.5180 (1.9300) mid-week closing around the 0.5275 (1.8960) area extending its run to a 17-week high. Both central banks should retain policy, BoE at 5.25% and the RBA at 4.35%. We see a small chance the RBA could hike to 4.6% but this would be a gutsy move. The BoE could start conversations around cutting sooner than later but will most likely confirm a wait and see approach based on incoming data over the next couple of months. Also of note is monthly UK GDP for March with no improvement from 0.1% expected. We favour a retest of 0.5305 (1.8850) over the week.

Current Level: 1.8971
Resistance: 1.9100
Support: 1.8900
Last Weeks Range: 1.8940- 1.9308

It’s a very quiet week on the Euro (EUR), New Zealand Dollar (NZD) calendar especially midweek when we have French and German holidays. The kiwi rallied late in the week from 0.5510 (1.8150) all the way to 0.5602 (1.7850) to close at this level, Monday’s action has seen the Euro recover slightly to 1.7920 (0.5580) as I write. ECB’s Lane said recently that incoming data has given him more confidence that inflation is returning to the target zone. We believe the kiwi may drift lower over the week.

Current Level: 1.7930
Resistance: 1.8060
Support: 1.7860
Last Weeks Range: 1.7844 – 1.8154

It’s a very quiet week on the Euro (EUR), New Zealand Dollar (NZD) calendar especially midweek when we have French and German holidays. The kiwi rallied late in the week from 0.5510 (1.8150) all the way to 0.5602 (1.7850) to close at this level, Monday’s action has seen the Euro recover slightly to 1.7920 (0.5580) as I write. ECB’s Lane said recently that incoming data has given him more confidence that inflation is returning to the target zone. We believe the kiwi may drift lower over the week.

Current Level: 0.5577
Support: 0.5540
Resistance: 0.5600
Last week’s range: 0.5508- 0.5604

This week’s Bank of England (BoE) policy statement and official Cash Rate holds centre stage on the calendar with expectations the central bank will maintain their hold of 5.25%. We are predicting a less hawkish approach from the Bank of England which has possibly given rise to the New Zealand Dollar (NZD) of late. Prices in the pair have come back a long way from mid last week’s 0.4705 (2.1250) level to this morning’s 0.4785 (2.0890) bouncing off the Fib 50% level at 0.4805 (2.0820) of note. With risk sentiment still good we could see a push back into the 48’s this week.

Current Level: 2.0916
Resistance: 2.0970
Support: 2.0820
Last Weeks Range: 2.0825- 2.1258

This week’s Bank of England (BoE) policy statement and official Cash Rate holds centre stage on the calendar with expectations the central bank will maintain their hold of 5.25%. We are predicting a less hawkish approach from the Bank of England which has possibly given rise to the New Zealand Dollar (NZD) of late. Prices in the pair have come back a long way from mid last week’s 0.4705 (2.1250) level to this morning’s 0.4785 (2.0890) bouncing off the Fib 50% level at 0.4805 (2.0820) of note. With risk sentiment still good we could see a push back into the 48’s this week.

Current Level: 0.4781
Resistance: 0.4805
Support: 0.4770
Last Weeks Range: 0.4705- 0.4800

The New Zealand Dollar (NZD) is still underperforming against the Australian Dollar (AUD) sitting just off the yearly bottom of 0.9070 (1.1026) at 0.9078 (1.1015) the 11-month low as I write. The kiwi had a good run higher late last week but was unable to hold levels around 0.9115 (1.0970). A hawkish slant at today’s RBA meeting could be the catalyst for the Aussie strength of late with prospects of a hike not outside the realms of probability. Even if the RBA maintain their 4.35% the rhetoric could be centered around high inflation. The next rate cut is forecast for November at the earlier, there is a chance this could get pushed out. If this happens we would almost certainly see further strength in the AUD and a look at 0.9000 (1.1110)

Current Level: 1.1020
Resistance: 1.1050
Support: 1.0900
Last Weeks Range: 1.0958- 1.1026