USD index at highest level since September 2010

USD index at highest level since September 2010

by Kymberly Martin

NZD

The NZD/USD has been fluctuating in a 0.7580-0.7650 band over the past 24-hours, currently trading mid-range at 0.7620.

Our risk appetite indicator (scale 0-100%) remains at a subdued 44%. Global equity markets posted modest gains overnight, with the Euro Stoxx up 0.60% and the S&P500 currently up 0.80%.

However, the general market tone was one of continued caution and European headline watching.

Market sentiment was also not helped by headlines that China has no intention of introducing large scale stimulus. In this backdrop the NZD/USD did well to oscillate sideways, finding support above 0.7580.

The NZD managed to make some progress on the crosses, suggesting selling pressure on the NZD may be losing a bit of momentum, for now.

The NZD/GBP moved up from 0.4850 to 0.4870. The NZD gained on a generally weak EUR. The NZD/EUR rose further off mid-May lows to trade around 0.6100 currently. We continue to look for a climb back towards 0.6200, in time.

There is no too much locally to impact the currency today. NZ building permits data should not cause too much of a flurry.

Markets will remain in European headline scouring mode. For today, NZD/USD support is eyed around 0.7580 Resistance will continue to found on bounces above 0.7650.
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Majors

USD strength was the prevailing theme overnight. The ‘safe haven’ currency remained in favour as the market was peppered by the usual array of headlines.

Spain attempted to calm nerves with claims it plans to recapitalise ailing Bankia though new debt issuance, and unlikely to inject bonds directly.

The Spanish Treasury also said it would centralise and issue debt for the regions under strict budget control. The market remained skittish however, and the EUR/USD declined from highs above 1.2570 last evening to just above 1.2480 currently.

Conversely, the USD index rose from lows last evening below 82.10 to around 82.50 currently. This is the highest level on the index since September 2010.

The GBP/USD was dragged down along with the EUR/USD, tumbling from above 1.5700 to trade around 1.5630 at present.

The AUD/USD zig-zagged sideways over the past 24-hours. Finding solid support at the 0.9800 level the currency now trades around 0.9840.

The key hurdle for the AUD/USD today will be the release of AU retail sales data at 1.30pm (NZT). After a strong 0.9%m/m rise in March expectations are for growth to decline to 0.2%-0.3%m/m in April. A lower outcome would likely cause the currency to retest the 0.9800 level.

Tonight, UK mortgage and consumer credit data will be released. European consumer and business confidence indicators are also due. It would be surprising if these were anything but depressed.

We also get more US housing data with mortgage applications and pending home sales.

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