Currency markets were all broadly weaker through the later stages of the week once risk markets were put on notice; NZD is trading just off its lows at 0.6730 midday Tuesday after starting the week at 0.6745; AUD strength has dominated the NZD

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By Neven Fisher*:

Currency markets were all broadly weaker through the later stages of the week once risk markets were put on notice. The Federal Reserve held their benchmark rate unchanged at 2.00%. September 27 is the next Fed meeting which markets are expecting a hike to 2.25% with a strong possibility later in the year for another if economic data continues to print well. The Non-Farm Payroll figure came in light at 157K which surprised markets after 191K was predicted. The number for July is weaker but upward revisions to May and June totalling 59K jobs show overall its close to market predictions. The employment rate moved lower to 3.9% from 4% with wages rising 0.3% month on month inline with expectations. Trade tensions have surfaced once again with President Trump proposing a change from the 10% tariff on Chinese products to 25% on US 200B worth of Chinese products, this week this should continue to dominate markets. China have retaliated with a range of their own tariffs of 60B worth of US products with anywhere between 5% and 25% levy. The RBA and RBNZ both have Cash rate and monetary statements this week with no real expected changes to policy. The RBA could be cautious with their lingo around inflation given the recent disappointing second quarter figures. The RBNZ more than likely not change their current track with growth weakening and inflation rising, we could see further downside in the kiwi after the announcement. Brexit is still a mess with recent talks stalling. Theresa May still fears that talking up the possibility of a Brexit deal could spark a mass exodus of businesses from Great Britain. A no deal situation still remains a high chance.

Major Announcements last week:

  • US Federal Reserve left rates unchanged at 2.00% leaving the door open for 27th September
  • Bank of Japan left raets on hold at -0.10%
  • Bank of England raised their OCR to 0.75% from 0.5%
  • Australian Retail Sales rose to 0.4% from 0.3%
  • US Non Farm Payroll printed at -157k down from 191k, USD stayed strong
  • Australian and Canadian Bank holidays Monday

NZD/USD

The New Zealand Dollar (NZD) is trading just off its lows at 0.6730 midday Tuesday after starting the week at 0.6745. Briefly after US Non-Farm Payroll released Friday the cross spiked to 0.6765 but this short bullish move wasn’t to last. We have the crucial RBNZ cash rate announcement to release Thursday with Adrian Orr likely to keep the rate on hold at 1.75% for a while longer. The review will hopefully hold key information on whether he plans to hike rates or lower rates given things remain in the balance with slowing growth and rising inflation. Current forecasts show the RBNZ has not played with the OCR since September 2016 with expectations they would like rates to be around 1.9% in September 2019. With Trade disputes still very much a big market driver and interest rate differentials between the US at 2.00% (expected to rise to 2.50% in 2018) and NZ at 1.75% the theory shows further downward momentum in the pair looms.

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD/USD0.67300.67150.67650.6721 – 0.6830

NZD/AUD (AUD/NZD)

Australian Dollar (AUD) strength has dominated the New Zealand Dollar (NZD) over the past 9 days or so as we have seen it break from the recent medium term range to trade to 0.9105 (1.0983) Tuesday lunch. To be fair it’s been all one way traffic since Australian Trade Balance and Retail Sales Friday printed up on expectation turboing the Aussie’s momentum. With the cross trading just shy of key support of 0.9100 from 2 July, the RBA cash rate announcement this afternoon will be important for a further push lower. Markets are expecting a slightly dovish view of the economic future with widespread expectations they will keep the rate at 1.50% for a record 24th consecutive month. I’m reluctant to offer my view of a softer AUD post RBA (I think I just did) but something tells me we could see 0.90’s develop.

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD / AUD0.91030.91000.91400.9105 – 0.9207
AUD / NZD1.09711.09201.09891.0862 – 1.0983

NZD/GBP (GBP/NZD)

The New Zealand Dollar (NZD) reached a high of 0.5195 (1.9250) Friday vs the British Pound (GBP) after weaker UK Services PMI released lighter at 53.5 from the 54.7 markets were expecting weakening the GBP to fresh lows. Monday we have seen continued weakness in the Pound (GBP) with the pair hovering around pivotal level of 0.5210 (1.9200). The main news of the week will be the RBNZ Official Cash Rate announcement on Thursday where the rate is widely expected to remain at 1.75%. UK Manufacturing Production is released at the end of the week along with monthly GDP figures. Buyers of Pound will be hoping both these will publish negative so further upside momentum continues. The long term 2018 range of 0.5045 (1.9820) and 0.5300 (1.8890) is well intact.

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD / GBP0.52000.51650.52100.5150 – 0.5207
GBP / NZD1.92301.91901.93601.9204 – 1.9416

 NZD/CAD

The New Zealand Dollar (NZD) is trading just off its lows Tuesday against the Canadian Dollar (CAD) after giving away 120 points last week falling to 0.8750. As Crude oil prices have eased the pair looks to be consolidating around 0.8770. Stronger Canadian Trade Balance figures of -0.6B compared to -2.3B expected have boosted the CAD. This week we have the RBNZ Official Cash Rate announcement on Thursday where the rate is widely expected to remain at 1.75%. We expect further NZD downside to develop with a possible retest of 0.8340 the November 2017 low.

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD / CAD0.87500.87400.89700.8747 – 0.8920

NZD/EURO (EURO/NZD)

The New Zealand Dollar (NZD) Friday travelled to a low of 0.5805 (1.7225) against the Euro (EUR) before bouncing back to 0.5834 (1.7140) as risk currencies benefited. The pair is still operating within its 3 week range of 0.5840 (1.7120) and 0.5800 (1.7250). The main news of the week will be the RBNZ Official Cash Rate announcement on Thursday where the rate is widely expected to remain at 1.75% with a neutral bias expected. With no Euro data to come out this week we should see further choppy movement continue.

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD/EUR0.58220.57570.58500.5805 – 0.5843
EUR/NZD1.71761.70881.73701.7115 – 1.7227

NZD/YEN

The New Zealand Dollar (NZD) continued to fall in value Friday against the Japanese Yen (JPY) reaching 74.85 where it closed the week. Monday’s action has seen the pair consolidate around 75.00 This week we have the RBNZ Official Cash Rate announcement on Thursday where the rate is widely expected to remain at 1.75% We expect further NZD downside this week to possibly 74.00 representing the low of November 2016 as we remain in the bearish channel from 83.90 (8th Jan 2018)

DIRECT FXCurrent levelSupportResistanceLast wk range
NZD / YEN74.8874.1076.3074.87 – 76.30

AUD/USD

The Australian Dollar (AUD) recouped losses from the low of 0.7340 climbing back to 0.7410 during late Friday’s trading. Closing around 0.7400 for the week represents a good result given the volatility we have seen this week, with the pair finishing bang on the weekly open price. Monday’s Aussie Bank holiday has seen the cross drift lower to 0.7370, in a market which has been quiet the AUD has underperformed. Perhaps an insight of things to come with the RBA cash rate and statement to release later today. Investors are expecting a dovish slant to rhetoric. Data over the rest of the week will be light for the pair with US Core Consumer Price Index printing Friday. We expect the Aussie to go lower as the week progresses retesting 0.7370

DIRECT FXCurrent levelSupportResistanceLast wk range
AUD / USD0.73880.73150.74900.7349 – 0.7440

AUD/GBP (GBP/AUD) 

A retest of 0.5670 (1.7630), as we mentioned in the previous commentary, came and went Friday with the British Pound (GBP), Australian Dollar (AUD) pushing much higher than we anticipated. GBP weakness was very evident once the pair breezed through 0.5670 (1.7630) on its way to 0.5715 (1.7500). Escalating trade conflicts between the US and China weighed on the Aussie Dollar even though a slightly better than expected Retail Sales number for June surprised markets. This week in focus is the RBA Interest Rate decision with a slight bearish tone expected.

DIRECT FXCurrent levelSupportResistanceLast wk range
AUD / GBP0.57070.55650.57500.5612 – 0.5712
GBP / AUD1.75221.74001.79701.7500 – 1.7818

AUD/EURO (EURO/AUD)

The Euro (EUR), Australian Dollar (AUD) broke higher from its range Friday clearing 0.6385 (1.5660) on its way to fresh highs of 0.6405 (1.5615) a seven week high. The release of the Q2 Eurozone GDP disappointed showing growth is building slower than anticipated bringing fresh speculation that the ECB will be slow to tighten monetary policy. Retail Sales boosted Aussie fortunes coming in at 0.4% instead of the market predicted 0.3% and surprising markets. This week in focus is the RBA Interest Rate decision with a slight bearish tone expected.

DIRECT FXCurrent levelSupportResistanceLast wk range
AUD/EUR0.63900.63000.64450.6321 – 0.6404
EUR/AUD1.56501.55201.58701.5616 – 1.5820

AUD/YEN

Australian Retail Sales released at 0.4% higher than the market predicted 0.3% pushing the Aussie Dollar (AUD) back in favour against the Japanese Yen (JPY) At one point spiking to 82.70 but drifting back to 82.30 where it stayed for the remainder of the week. Further sideways action has been the theme Monday with an Australian Bank Holiday creating lighter trading volumes. The RBA will announce their Cash Rate today at 4.30pm NZT with more of the same rhetoric expected and 1.50% to remain intact. Japanese prelim quarterly GDP prints Friday, anything south of the predicted 0.3% will could send the pair retesting 83.80

DIRECT FXCurrent levelSupportResistanceLast wk range
AUD/YEN82.2180.6584.0082.01 – 83.21

AUD/CAD

Canadian and Australian Bank holidays Monday has seen the Aussie (AUD) and Loonie (CAD) cross move within a 20 point tight range. The AUD pushed off the low of 0.9580 Friday with better than expected Retail Sales narrowly avoiding drifting lower through long term support of 0.9550- the low of May 2016. The RBA will announce their Cash Rate today at 4.30pm NZT with more of the same rhetoric expected and 1.50% to remain intact. Friday’s Canadian Employment figures will be one to watch especially if we have buoyant Crude prices over the week we may retest lows.

DIRECT FXCurrent levelSupportResistanceLast wk range
AUD / CAD0.96040.95500.98100.9580 – 0.9705

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Market commentary:

Currency markets were all broadly weaker through the later stages of the week once risk markets were put on notice. The Federal Reserve held their benchmark rate unchanged at 2.00%. September 27 is the next Fed meeting which markets are expecting a hike to 2.25% with a strong possibility later in the year for another if economic data continues to print well. The Non-Farm Payroll figure came in light at 157K which surprised markets after 191K was predicted. The number for July is weaker but upward revisions to May and June totalling 59K jobs show overall its close to market predictions. The employment rate moved lower to 3.9% from 4% with wages rising 0.3% month on month inline with expectations. Trade tensions have surfaced once again with President Trump proposing a change from the 10% tariff on Chinese products to 25% on US 200B worth of Chinese products, this week this should continue to dominate markets. China have retaliated with a range of their own tariffs of 60B worth of US products with anywhere between 5% and 25% levy. The RBA and RBNZ both have Cash rate and monetary statements this week with no real expected changes to policy. The RBA could be cautious with their lingo around inflation given the recent disappointing second quarter figures. The RBNZ more than likely not change their current track with growth weakening and inflation rising, we could see further downside in the kiwi after the announcement. Brexit is still a mess with recent talks stalling. Theresa May still fears that talking up the possibility of a Brexit deal could spark a mass exodus of businesses from Great Britain. A no deal situation still remains a high chance.

Australia

Australia bank holiday Monday brought about a slow start to the week and a lack of any real liquidity. Australian Dollar bears dominated most of the prior week depreciating the Aussie to a low of 0.7350 against the greenback. Non-Farm – Payroll disappointed printing down on expectation, with 157,000 fresh people entering the workforce. US Manufacturing was also weaker pushing up the Australian Dollar to 0.7410 where it closed the week. Trade issues between China and the US continue to soften the Aussie with the Chinese economy starting to hurt as a result. The Chinese equity market is down 17% this year with the Chinese currency the Yuan devaluing 7%. If tensions rise further global growth could take a hit denting oil prices and making it difficult for the Australian mining sector. Expect the same rhetoric during the RBA announcement Thursday and the cash rate to stay unchanged at 1.50%

New Zealand

The New Zealand Dollar saw little upside from last Tuesday with the currency falling across the board in heavy trading. US Non-Farm Payroll figures were lighter than markets were expecting weakening the US Dollar late Friday, the kiwi pushing higher to 0.6760 against the greenback at one point trading to a low of 0.6720. The RBNZ will announce their cash rate Thursday which will in turn remain unchanged at 1.75%. Adrian Orr won’t deviate from recent rhetoric which includes weakening growth and slowly rising inflation. Trade Tensions will dominate proceedings again this week with more retaliations expected from President Trump on Chinese Products and likewise for China. We expect the New Zealand Dollar to fall in value after the announcement to retest late June bottoms.

United States

The US Non-Farm Payroll July figures disappointed Friday but with May and June revised results printing higher at 59,000, these figures have more than alleviated the weaker July showing. The figures showed an increase to the US workforce of 157,000  for July but was down on the expected 191,000 markets were expecting. The unemployment rate also published down at 3.9% from 4.00% not a huge decrease but a positive result nonetheless. ISM Manufacturing published weaker than thought at 55.7 compared to 58.6 and helped to keep the US Dollar under pressure leading into the weekly close. This week we have Producer Price Index which should show growth for the third straight month around 0.2% and later in the week pivotal monthly Consumer Price Index. Expect further fireworks from Trump this week as he ramps up trade tariff speak with China.

Europe

The Euro fall heavily last week with the currency being the worst performing currency of the top eight. Against the US Dollar it was abandoned in a sea of US Dollar strength to 1.1560. With a lack of any significant local releases through the second part of the week the Euro has struggled to gain any traction with mostly positive US data publishing. We see nothing on the calendar this week to speak of, only Italian and French Holiday’s Wednesday which will slow up an otherwise wet week for the Euro. Dropping below 1.1500 versus the US Dollar the Euro will delve into an unknown Abyss – post this point we see no significant support through to 1.1200. With a widening monetary policy between the US and the EU expected to widen further with the Fed raising rates in September and perhaps again later in the year we can expect more pressure to go on the EUR. The US 2 year currently yields a multi year high of around 2.65% while the 2 year German equivalent continues to trade at a negative yield. This differential signifies Euro weakness going forward.

United Kingdom

The British Pound saw quiet early trading in anticipation of the Bank of England cash rate announcement. The BoE excitement didn’t disappoint with the vote returning a 9-love in favour of the hike to 0.75%. The announcement was largely factored into markets already but perhaps not quite as much as thought. The Pound retreated from around 1.3130 on the announcement sliding to 1.2975 – 155 points versus the greenback and lost ground all other major currencies. Recent data has suggested a glitch in UK growth with manufacturing sectors still returning positive figures and the employment rate is still low at 4.2% The next fully prices in rate hike is seen for September 2019 although what happens between now and then with Brexit could impact. Further Brexit headlines and noise could move the Sterling sharply in either direction. The Pound hangs just shy of 1.2970 the low of August 2017

Japan

The Japanese Yen regained early week losses Friday after markets turned risk averse and bought the Yen on large. US Non-Farm Payroll figures disappointed but with a recently revised 59,000 added from recent history the number of 157,000 didn’t look so bad. The Bank of Japan held their monetary policy minutes and has decided to continue guiding 10- year Government Bond yields around 0%. Members were in agreement that financial conditions in Japan were highly accommodative and shared the view that under QQE (Quantitative Easing) with yield curve control companies funding costs have been at extremely low levels with financial institutions and lending attitudes continue to be active. The Current Account prints tomorrow.

Canada

Canadian holiday Monday has made for thin trading on the weekly open. The Canadian Dollar has gaped to 1.3015 after news hit headlines suggesting the Saudi Ministry of Foreign Affairs accused Canada of making “false” statements and interfering with Saudi Internal affairs. The Canadian ambassador was no longer welcome in the country. The news came in the wake of Global Affairs Canada issued a statement criticizing the arrest of Samar Badawi the sister of jailed blogger Ralf Badawi. The Saudi Arabian government has frozen all trade investments with Canada as a result. Crude Oil prices are stable around the 68.50 mark with further trade tensions between China and the US expected to dominate markets this week. Canadian unemployment figures print at the end of the week.

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USD 

NZD

End of day UTC
Source: CoinDesk

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