The NZD drifted lower late last week to a low of 0.7270 against the USD during the NY session to close the week at 0.7292; NZDAUD lost ground; USD retraces recent losses; NZD to look to offshore data for direction this week

By Neven Fisher*:

Equity markets are trading at new three week highs with the DOW, and the S&P 500 trading sharply higher for the third straight day. The DOW up 500 points on this time last week to 25709 and the Nasdaq to 7414 from 7250. As we reported prices to continue past 25500 last week this is an incredible turnaround from the February low of circa 23400 in the DOW particularly. The US Dollar index trades around the 89.82 zone confirming the US Dollar had a comeback week retracing recent weeks movements over most major pairs.

The ECB is currently buying huge amounts of bonds per month and will continue until September 2018. The meeting in March will signal what impact this will have on monetary policy for the rest of 2018 and 2019.

The BoE governor Ramsden spoke about the need to raise interest rates faster than anticipated based on accelerating wage growth factors. The Pound (GBP) dropped in value against the cross currencies. Brexit concerns are still a hotly talked about subject with just 6% of small and medium sized businesses saying the Government is not listening to their concerns, businesses are worried about what the implications are, the government must consider this when the next negotiating is done.

The Australian Dollar (AUD) lost ground last week perhaps falling short of what’s happening around the rest of the world with monetary policy on the up, the RBA seem a little timid leading into 2018 with policy and general optimism. Quarterly Private Capital Expenditure on Thursday may give the Australian Dollar (AUD) the punch it needs.

The economic week will be busy with a slew of data to be released including the Fed Chair Powell testifying Friday and BoE governor Carney speaking as well. Next week we have the all-important Non-Farm Payroll figures.

Major Announcements last week:

  • • UK Average earnings 2.5% as expected
  • Second Estimate of UK GDP 0.4$ vs 0.5% expected
  • Core Retail Sales -1.8% vs 0.1%
  • NZ Retail Sales 1.7% vs 1.4% expected
  • Canadian CPI 0.7% vs 0.4% expected

NZD/USD

The New Zealand Dollar (NZD) drifted lower late last week to a low of 0.7270 against the United States dollar (USD) during the NY session. Friday’s Retail Sales for December was positive with 1.7% as opposed to 1.4% expectation. This pushed buyers into NZD for a while before NZD succumbed to US strength closing the week at 0.7292, 80 points lower than the Monday open. This week sees a bunch of economic data to be released globally with only ANZ Business Confidence of note locally.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7295 0.7260 0.7345 0.7271-0.7382

NZD/AUD (AUD/NZD)

The New Zealand Dollar (NZD), Australian Dollar (AUD) pair lost ground Friday travelling back to 0.9300 (1.0752) after posting a high of 0.9386 (1.0654) Thursday. RBA Minutes earlier suggested a casual tightening of interest rates based on slow wage growth. We mentioned current levels above 0.9300 seemed unjustified- we were right, NZD/AUD opened the week lower, the kiwi losing further support to 0.9280. ANZ Business Confidence Wednesday along with Quarterly Capital Expenditure Thursday. Buyers of AUD should consider current buying levels.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9280 0.9229 0.9332 0.9280-0.9385
AUD / NZD 1.0770 1.0715 1.0835 1.0655-1.0776

NZD/GBP (GBP/NZD)

The Great British Pound (GBP) lost some of its late Friday gains against the New Zealand Dollar (NZD) opening lower Monday at 0.5200 (1.9230). The BoE deputy governor Ramsden spoke about the need to raise interest rates faster than anticipated based on accelerating wage growth factors. The Pound (GBP) dropping in value against the New Zealand Dollar (NZD) to 0.5246 (1.9062), interestingly as these comments were generally hawkish, the Pound remained on the back foot across the board.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5220 0.5204 0.5278 0.5205-0.5289
GBP / NZD 1.9157 1.8945 1.9215 1.8906-1.9213

 NZD/CAD

The Canadian Dollar (CAD) fought back against the New Zealand Dollar (NZD) late in the week closing over half a cent up on the weekly close based on stronger Consumer Price Index monthly figures publishing at 0.7% vs the 0.4% expectation. NZ Core Retail Sales were positive for the NZD creating a small advancement on the CAD. In Canada later in the week we have fourth quarter GDP released with recent figures suggesting a slightly faster paced economy over the third quarter, this will almost certainly lead to a rise in the CAD with most crosses, 0.9350 the recent high could be tested.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9245 0.9200 0.9345 0.9203-0.9349

NZD/EURO (EURO/NZD)

The New Zealand Dollar (NZD) strengthened against the Euro (EUR) Monday after ECB president Draghi spoke. He is reluctant to change his stance on monetary policy even though stronger inflation numbers are expected, he will revisit the current stance in March to establish a more reliable picture going forward. The NZD/EUR still trades in a long term bearish trend from the high of 0.6422 (1.5570) the pair is trading around the (0.5940) 1.6830 currently and looks set to continue possibly through to the previous low of 0.5714 1.7500). Buyers of EUR should consider current levels as the ECB looks to possibly finish its monetary stimulus by the end of 2018.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5915 0.5882 0.5972 0.5914-0.5976
EUR/NZD 1.6906 1.6745 1.7000 1.6735-1.6909

NZD/YEN

The New Zealand Dollar (NZD) has pushed higher on the weekly open as it tries to regain the losses incurred last week. Coming off its low of  77.75 it has stabalised around the 78.00 area with ANZ Business confidence due out Wednesday. The New Zealand Dollar (NZD) now looks to 80.00 resistance level in thin markets with no real significant fundamental BOJ data, markets are guided by technical’s for direction.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 78.00 78.64 79.30 0.7765-0.7930

AUD/USD

The Australian Dollar (AUD) closed the week after a late surge back to 0.7830 RBA Minutes suggested slow progress to the economy with a general wait and see approach. This week has limited data – new Home Sales will provide some local direction amid a busy US based economic data to publish.  As the greenback (USD) gains momentum I would consider buying USD at current levels.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7860 0.7810 0.7900 0.7791-0.7934

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) Great British Pound (GBP) pair continued its choppy run of late, trading as low as 0.5586 (1.7900) Friday and again through Monday it retraced lower to 0.5633 (1.7750) during BoE Ramsden’s speech around Interest rates. Hinting of faster recovery than markets expect he underlined the need to hike rates possibly quicker than forecasted. The Pound has stabalised early Tuesday around the (0.5624) 1.7780, Manufacturing PMI is released Thursday to offer further GBP direction. Technically the paid is still in a bearish cycle from the high of (0.5850) 1.7100 we may see further Pound strength in the short to medium term.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5625 0.5583 0.5637 0.5584-0.5678
GBP / AUD 1.7777 1.7740 1.7910 1.7611-1.7909

AUD/EURO (EURO/AUD)

After last week’s price range bound action the Australian Dollar/Euro (AUD/EUR) pair continues to knock around in its boring retracements, 0.6402 (1.5620) the high and 0.6330 (1.5800), the low trading anywhere in between. ECB Policy Minutes had no real impact as its sits at 0.6381 (1.5670) Tuesday. CPI announcements today along with German Retail Sales Friday may give the pair some reason to break out of its current cycle.

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6375 0.6350 0.6402 0.6347-0.6407
EUR/AUD 1.5686 1.5620 1.5720 1.5608-1.5756

AUD/YEN

The Australian Dollar (AUD) has shrugged off dipping lower than 83.25 the long-term low, rebounding in thin markets Monday to ease back to 83.90. With no real news released of significance this week in Japan or Australia except quarterly Private Capital Expenditure Thursday we may see the AUD remain in favor over the short term back above 84.00 leading into next week.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 84.05 83.40 84.53 83.28-84.86

AUD/CAD

Higher Oil prices have once again given much needed support to the Canadian Dollar (CAD) the CAD pushing back on recent Australian Dollar movement late in the week as it looks to break the recent trend line lower to 0.9870 The bullish long-term support over the Australian Dollar may see it rise back to parity before long if oil values are not supported above recent levels above 64.00.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9960 0.9900 1.0000 0.9874-0.9987

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Market commentary:

Equity markets are trading at new three week highs with the DOW, and the S&P 500 trading sharply higher for the third straight day. The DOW up 500 points on this time last week to 25709 and the Nasdaq to 7414 from 7250. As we reported prices to continue past 25500 last week this is an incredible turnaround from the February low of circa 23400 in the DOW particularly. The US Dollar index trades around the 89.82 zone confirming the US Dollar had a comeback week retracing recent weeks movements over most major pairs. The ECB is currently buying huge amounts of bonds per month and will continue until September 2018.

The meeting in March will signal what impact this will have on monetary policy for the rest of 2018 and 2019. The BoE governor Ramsden spoke about the need to raise interest rates faster than anticipated based on accelerating wage growth factors.

The Pound (GBP) dropped in value against the cross currencies. Brexit concerns are still a hotly talked about subject with just 6% of small and medium sized businesses saying the Government is not listening to their concerns, businesses are worried about what the implications are, the government must consider this when the next negotiating is done.

The Australian Dollar (AUD) lost ground last week perhaps falling short of what’s happening around the rest of the world with monetary policy on the up, the RBA seem a little timid leading into 2018 with policy and general optimism. Quarterly Private Capital Expenditure on Thursday may give the Australian Dollar (AUD) the punch it needs.

The economic week will be busy with a slew of data to be released including the Fed Chair Powell testifying Friday and BoE governor Carney speaking as well. Next week we have the all-important Non-Farm Payroll figures.

Australia

The Aussie (Australian Dollar) closed the week 70 points lower against the greenback (USD) hitting a low Thursday of 0.7790. Friday saw AUD back in support pushing back towards 0.7850 with a spike in equity markets and Gold. Seems the Australian economy is falling behind the rest of the world with growth projections and interest rate forecasts, speaking of a wait and see approach through 2019.This week is a quiet week for local data with only quarterly Private Capital Expenditure due on Thursday. Reasonable levels for buyers of USD if the strength of US Dollar continues.

New Zealand

The New Zealand Dollar (NZD) was weaker across the board against its closest rivals, the Japanese Yen (JPY), EURO (EUR), British Pound (GBP) and the US Dollar (USD) declining to nearly a two week low against the US Dollar with hawkish FOMC, the New Zealand Dollar focused on offshore announcements. We may see a volatile NZ Dollar (NZD) this week as it eyes US based data for further direction, any upside news in the US could lead to further NZD weakness, 0.7200 key support looks venerable.

United States

The US Dollar finished the week positively- the US Dollar Index higher on the close to 89.98 as the greenback (USD) held its ground- just. Equity markets were also higher the DOW and Nasdaq both increased in value over 1.3% to 25,309 and 7,337. The 10 year Bond fall short of 3.00% currently trading at 2.86% – with perhaps the calm before the storm as higher short term interest rates are on the way. This week sees a slew on US Economic data to be released with focus to be on growth with Core Durable goods and GDP Wednesday with Federal Reserve Chairman Powell testifying later in the week.

Europe

The EURO was sold off late last week but remains solid around the 1.23 area finding support. ECB president Draghi spoke Monday and said uncertainties continue to prevail as patience and persistence with monetary policy is still needed. He made further comment that the economy remained stronger than previously expected but recent growth wasn’t yet translating into a rate of inflation they were happy with. The ECB is targeting around 2.00% in the medium term but January’s figures show just 1.3%. The ECB is currently buying 36.9B in bonds per month and will continue until September. The meeting in March the ECB will signal what impact this will have on monetary policy. Perhaps CPI figures to publish later today will give the EUR further stimulation.

United Kingdom

The British Pound (GBP) bounced off its early week loses against the majors to close the week at 1.3969 over the US Dollar (USD). The BoE governor Carney spoke but didn’t commit to a decisive plan regarding future interest rate plans but hinted the downsizing of stimulus over the next few years is likely. Manufacturing Purchasing Managers Index is released Thursday and will be a good measure as to whether Januaries poor figures were just a one off or a bigger picture problem and should tell us if this sector has anything to be concerned about for 2018. Technically I suspect the GBP may lose a little ground over the week perhaps back to last week’s low of 1.3850 against the US Dollar.

Japan

The Japanese Yen (JPY) lost ground over the week closing down over most of its rival currencies. The Yen (JPY) continues to be driven largely by offshore fundamentals as we continue into another week of no real local Japan based economic data. The only news of note seems to be ongoing discussions over the 10 year US and Japanese bond spread widening further creating further pressures on the Bank of Japan. Over the long term as the US Fed tighten rates this should support the USD. With the USD/JPY dropping from 112.50 this year it may have a lot further to go before correlation between the two economies. JPY/USD is trading Tuesday around 106.90 levels just above the weekly open.

Canada

The Canadian Dollar (CAD) made slight ground against the greenback late last week with a US led decline but the US Dollar was soon back in favor trading back over the Monday open of 1.2630 in a quiet start to the trading week. There are no Canadian economic releases on the schedule this week. Canada releases its annual budget on Tuesday night, the Canadian government was steady over the last quarter as they revised down the 2017-2018 fiscal deficit to CAD 19.8 Billion recently. This could well be revised lower based on recent fiscal numbers. Crude oil makes a new high of 64.05 up nearly 1%- if prices continue to improve we may see USD/CAD trading back at the previous low of 1.2600. The Loonie (USD/CAD) trades around the 1.2700 area currently

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