The AUD and NZD have both been in a reasonably tight trading range for the last week, with NZ inflation easing and Australian flash PMI data showing recessionary economic conditions. The cross rate has been tight, trading between 0.9200 and 0.9300, with no major moves expected to the upside or downside.
Current Level: 0.9265
Resistance: 0.9315
Support: 0.9215
Last Weeks Range: 0.9231 – 0.9300
NZ Q4 Inflation data confirmed inflation is declining fast, falling from 5.6% to 4.7%, easing the pressure on the RBNZ. The easing of inflationary conditions in New Zealand will allow monetary policy to at least neutralise in 2024, with a view to rate cuts later in the year. Bond yields will start to fall and this will ease pressure on the NZ Dollar. The NZD has traded around 0.6100 for the last week, but will rely on easing monetary conditions in the US for any upside.
Current level: 0.6105
Support: 0.6055
Resistance: 0.6175
Last week’s range: 0.6064-0.6145
Are we seeing signs of a long-term base forming in the Australian Dollar (AUD), US Dollar (USD) pair at 0.6530? A January close below this level would be cause for concern and a rethink of where support lies. Certainly, when we look at the yearly open price circa 0.6815 the Aussie has come off a chunk in a short period of time. With the RBA done hiking interest rates, 2024 will be about cuts and the timing of these. We are forecasting 3 plus cuts in 2024. Let’s hope the banks pass on these rate drops to consumers- say are saying mortgage holders shouldn’t get too excited as not all cuts are passed down. The AUD may be pushed around this week by offshore forces based on no data publishing and an Australian Holiday Friday creating thin market conditions.
The current interbank midrate is: AUDUSD 0.6567
The interbank range this week has been: AUDUSD 0.6564- 0.6612
Moves in the Australian Dollar (AUD), New Zealand Dollar (AUD) cross extended off 0.9275 (1.0780) Monday from mid week’s 0.9365 (1.0680) as the Aussie eyes a fresh yearly high around 1.0830 (0.9230). The IMF has suggested the RBA should cut spending and hike rates further in order to reduce inflation targets back to the target band before 2026. This will have certainly been factored into recent AUD demand. The economic docket is thin this week in the pair with only NZ CPI y/y printing. Forecast is for a fall of 0.5% in the fourth quarter down from 1.8% in the third quarter. Year on year should print around 4.7% down for 5.6% confirming further pressure for the RBNZ to cut rates mid year or sooner. Australia Day Holiday Friday should see the cross meander into the close.
The current interbank midrate is: NZDAUD 0.9245 AUDNZD 1.0809
The interbank range this week has been: NZDAUD 0.9243- 0.9289 AUDNZD 1.0765- 1.0818
The New Zealand Dollar (NZD) has been sold off heavily in 2024 after starting the year at 0.6300 levels it has fallen to 0.6080 against the US Dollar (USD). NZ Manufacturing PMI’s were down to 43.1 from 46.5, together with talk around rate cuts have had a negative impact on the kiwi. NZ CPI tomorrow is due to publish much lower than the previous quarter of 5.6% y/y at 4.7% y/y confirming rate cuts should start around mid-year. Current forecasts are that inflation is predicted to be back around the target range of 1-3% by the third quarter. The cross is looking oversold to us at current levels, we would need to see a break below 0.6000 to confirm a bearish trend and take the heat off upside moves.
The current interbank midrate is: NZDUSD 0.6077
The interbank range this week has been: NZDUSD 0.6067- 0.6137
The European economy is in recessionary territory, with the added pressures of resurgent inflation. Inflation and bond yields had been collapsing in Europe, towards the latter part of 2023, with a combination of tumbling inflation and recessionary economic conditions. A resurgent inflation will ensure tight monetary conditions remain in place for an extended period. This will support the EUR (although ensure recessionary conditions remain). Similar pressures exist in the Australian economy so the cross rate will not move dramatically.
Current Level: 1.6611
Resistance: 1.6260
Support: 1.6666
Last Weeks Range: 1.6260 – 1.6611
The European economy is in recessionary territory, with the added pressures of resurgent inflation. Inflation and bond yields had been collapsing in Europe, towards the latter part of 2023, with a combination of tumbling inflation and recessionary economic conditions. A resurgent inflation will ensure tight monetary conditions remain in place for an extended period. This will support the EUR (although ensure recessionary conditions remain). Similar pressures exist in the Australian economy so the cross rate will not move dramatically.
Current Level: 0.6020
Resistance: 0.6150
Support: 0.6000
Last Weeks Range: 0.6020 – 0.6100
The surge in UK inflation, rising back to 4% this week, will ensure the Bank of England remains hawkish in their monetary policy, for the early part of 2024. This will support the GBP and add to the weaker economic conditions, domestically. The interest rate differential may support a stronger pound although RBA actions may dimmish the differential.
Current Level: 1.9398
Resistance: 1.9047
Support: 1.9417
Last Weeks Range: 1.9011 – 1.9398
Commodity demand has been directly impacted by the recessionary economic conditions in Europe, which has a down-chain economic impact on China, and thus the Australian commodity markets. Inflationary pressures in the Australian economy remain clear and present, while the labour market remains relatively firm. The resurgent reserve currency has forced the AUD back from 2023 highs of 0.6850, back down towards 0.6500. There may be some downside left, if Geo-Political conditions in the Middle East extend and supply chain problems remain.
Current Level: 0.6550
Support: 0.6540
Resistance: 0.6660
Last week’s range: 0.6550 – 0.6700
European economies are suffering recessionary economic conditions and a resurgence in inflation, dimming the likelihood of interest rate cuts in 2024 and adding to tight monetary conditions. The tight money conditions have supported the EUR, although weaker trade and growth do not auger well for 2024.
Current Level: 1.7889
Resistance: 1.7699
Support: 1.7921
Last Weeks Range: 1.7637 – 1.7899