by Kymberly Martin
NZ Dollar
After relatively range-bound trading on Friday, the NZD/USD gained momentum on Friday night as the USD weakened. The NZD/USD closed the week above 0.8330.
It was not until Friday night that the NZD gained some direction, as there was no local data to drive the currency during the day.
Disappointing USD data releases early on Saturday morning saw the USD extend some of its ‘Yellen-inspired’ weakness. The NZD was a beneficiary, pushing up to close the week above 0.8330.
The NZD was also notably higher relative to a weak JPY. The NZD/JPY pushed up to close the week above 83.50. Critical resistance is now eyed at 83.90, which has marked the high for this cross since May this year.
The NZD was also stronger relative to its key European peers and the AUD. Key resistance for the NZD/AUD remains in the 0.8910-0.8930 window. According to our momentum model, momentum remains in the
NZD/AUD’s favour, suggesting a push higher may be in the cards this week. Fundamentally, on the NZ data side, there is nothing likely to seriously challenge NZD strength this week.
Across the Tasman, the greatest challenge to the AUD may come with Thursday’s speech from the RBA’s Governor.
For today, the domestic data focus is the NZ PSI. Following on from last week’s strong PMI release we are hopeful the PSI can send a similar message of broad-based economic momentum. NZD/USD resistance is seen at 0.8360, while support is eyed at 0.8270.
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Majors
The USD continued to soften on Friday, assisted by disappointing US data. The AUD outperformed along with the NZD.
Our risk appetite index (scale 0-100%) sustained a fairly hearty 70% on Friday, a level that has held for much of the past month. Equities provided further modest positive returns as commodities held fairly steady.
The USD index was holding its own ahead of the US data releases on Friday night. However, these data both disappointed expectation i.e. US October industrial production (-0.1% vs. 0.2%), and the US Empire Manufacturing index for November (-2.2 vs. 5.0). The US index slipped from close to 81.10 to end the week at 80.80.
The EUR was a beneficiary of the move down in the USD. Independently, data confirmed core CPI at just 0.8%y/y in the Eurozone in October. This may provide the ECB with impetus to provide further stimulus to the economy, in time. For now, the EUR/USD has ended the week slightly higher, at close to 1.3500.
The GBP/USD also gained a boost on Friday night, extending its ‘Inflation-Report-inspired’ gains. It ended the week around 1.6120. The next level of resistance for the GBP/USD will be encountered at 1.6170, ahead of 1.6260.
The JPY continued to weaken on Friday night, with the USD/JPY pushing through the 100.00 level for the first time since mid-September. However, the USD/JPY encountered resistance at the 100.40 level, before closing the week at 100.20. A stiff band of resistance remains between 100.40 and 101.50 which has marked the currency’s highs since June this year. The key focus for the JPY this week may be the Bank of Japan’s rate announcement on Thursday.
The AUD/USD was stronger on Friday night. Benefitting from USD weakness it pushed up from 0.9310 to end the week at 0.9370. This week the RBA releases its board minutes, but greater market scrutiny may be directed at the Governor’s speech on Thursday evening, entitled “The Australian Dollar: Thirty Years of Floating”. The speech may provide more exploration of the reasons for the AUD’s current “over-valuation” and the outlook for the AU terms of trade. For now support for the AUD/USD is seen at 0.9280.
Today, the release of China property prices may be of interest for the AUD and risk sentiment in general. Tonight, the ECB releases its current account data while NAHB housing data is released in the US. US Fed members Dudley and Plosser are also scheduled to speak.
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