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NZDUSD currently sits around 0.7160 but if 0.7150 breaks look for a test of 0.7100; AUD struggling to stay above the 0.77 level despite strong economic news; Greek debt and political risk remains a focus in the EU

NZDUSD currently sits around 0.7160 but if 0.7150 breaks look for a test of 0.7100; AUD struggling to stay above the 0.77 level despite strong economic news; Greek debt and political risk remains a focus in the EU

By Howard Willcox*:

Very quiet start to the week with US markets closed on Monday for the Presidents Day holiday, currency markets have traded on reduce volumes and are mostly unchanged from Friday's levels. European equity markets were mixed to lower, as the withdrawal of the Kraft takeover bid for Unilever saw Unilever shares drop, offsetting gains across industrial stocks. With the US out, investors’ attention has centred on European developments. Political risk remains in focus, outweighing economic developments, with anti EU candidate Maine Le Pen gaining ground on her rivals as she benefits from increasing concerns over security, in the race for the French presidential elections. Across in Germany a new poll showed a drop in support for Chancellor Angela Merkel’s governing party which fell behind the opposition Social Democrats for the first time under hear leadership. In the UK some members of the House of Lords, parliament’s upper house, will seek changes to the draft “Brexit” law allowing the triggering of Article 50 the departure from the EU when it comes before the Lords. Later this week the US  Federal Reserve minutes from its last meeting will be released Thursday, possibly providing some incite as to how members view the new US administration's policies. Also later tonight/tomorrow there will be several speeches by Fed members which will be watched closely for any pointers to the probability of an interest rate hike at the March meeting.

Major Announcements last week:

  • US Producer PPI 0.6% vs 0.3% expected
  • UK Average Earnings Index 2.6% vs 2.8% expected
  • UK Claimant Count Change -42.4k vs +1.1k expected
  • Canadian Manufacturing Sales 2.3% vs 1.4% expected
  • US CPI 0.6% vs 0.3% expected
  • US Core Retails Sales 0.8% vs 0.4% expected
  • Australian Employment Change 13.5k vs 9.7k expected
  • Australian Unemployment Rate 5.7% vs 5.8% expected
  • NZ Retail Sales 0.8% vs 1.1% expected
  • UK Retail Sales -0.3% vs 1.0% expected
  • NZD PPI 1.0% vs 0.9% expected

NZD/USD

The New Zealand dollar has drifted lower against the United States dollar today and currently sits around 0.7160.  If 0.7150 breaks look for a test of 0.7100 Wednesday’s global dairy auction should provide some support if prices remain firm but as always the USD reigns on this cross and the FOMC minutes have potential to further pressure the New Zealand dollar.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7155 0.7100 0.7240 0.7137 - 0.7242

NZD/AUD (AUD/NZD)

After opening around 0.9348 this morning the New Zealand dollar has tracked lower against the Australian dollar, currently at 0.9321. Immediate support is at 0.9300 with further support at 0.9275. Given the more positive news and reports around the Australian economy and continuing firm commodity prices there is potential for a move towards the 0.9200 level over the next week.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9323 0.9275 0.9350 0.9326 - 0.9402
AUD / NZD 1.0726 1.0695 1.0781 1.0636 - 1.0723

NZD/GBP (GBP/NZD)

The New Zealand dollar has consolidated in a sideways pattern over the last few days against the UK Pound. It is currently around 0.5750 (1.7390) and has weakened on the firmer GBP dropping from a high of 0.5804 (1.7229) yesterday. There is no clear direction at this stage but next level is at 0.5720 (1.7470). The old 0.5700-0.5800 (1.7544-1.7242) range still prevails.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5745 0.5720 0.5914 0.5724 - 0.5809
GBP / NZD 1.7407 1.7094 1.7482 1.7214 - 1.7470

 NZD/CAD

The New Zealand dollar is trading sideways against the Canadian Dollar with a slight downside bias. Now around 0.9400 and it now looks that support at 0.9350 will be tested later this week.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9402 0.9350 0.9450 0.9349 - 0.9460

NZD/EURO (EURO/NZD)

No major moves in this cross with the 0.6745-0.6823 (1.4826-1.4656) still holding sway. The New Zealand dollar is currently trading around 0.6764 Euro (1.4785) and potential remains for a push to the 0.6800 (1.4705) if NZD news remains positive.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.6761 0.6730 0.6800 0.6741 - 0.6822
EUR/NZD 1.4791 1.4705 1.4858 1.4659 - 1.4835

NZD/YEN

The New Zealand dollar has stepped lower against the Yen from 81.90 level to 81.25. There is no clear direction but given that a break of 81.35 has occurred a run to the 80.65 support now looks more likely.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 81.30 80.65 81.90 80.98 - 82.59

AUD/USD

The Australian dollar continues to consolidate at higher levels against the United States dollar. It is still trading below the elusive resistance at 0.7700 but given the more positive data and supportive iron ore prices, a move back into the mid 0.7700 region is looking more likely.  The 0.7700/10 level is proving a tough nut to crack however and FOMC minutes this week may not help.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7668 0.7650 0.7710 0.7620 - 0.7728

AUD/GBP (GBP/AUD) 

The Australian dollar is marking time against the UK Pound, albeit with a gradual weakening tone. Now trading at 0.6161 (1.6230) with no real trend in evidence. Better UK data has been matched with stronger Aussie data so the status quo remains. Look for the current 0.6100- 0.6200 (1.6393-1.6129) range to continue for the next week.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.6161 0.6140 0.6200 0.6114 - 0.6199
GBP / AUD 1.6230 1.6129 1.6286 1.6133 - 1.6356

AUD/EURO (EURO/AUD)

Choppy price movement but in a small range for the Australian dollar vs the Euro. It’s now at 0.7251 after being down at 0.7194. Immediate resistance is at 0.7285 and given the more stable Aussie outlook we favour a test of this level over the

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.7247 0.6998 0.7285 0.7193 - 0.7285
EUR/AUD 1.3798 1.3726 1.4288 1.3727 - 1.3902

AUD/YEN

The Australian dollar is up and down on this cross coming off a 87.44 high to low of 86.28 over the last 4 days, is now back at 87.15 but no clear trend , partly to blame on directionless JPY trading ...we still favour the AUD on this cross and look for a move to 88.00 later in the week.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 87.16 86.30 88.00 86.31 - 88.17

AUD/CAD

The Australian dollar still in an uptrend against the CAD climbing from a low of 1.0023 to 1.0081 over the last week, now at 1.0080...next resistance is at 1.0098, which then targets 1.0166 last seen in November...will need some more solid Aussie data to achieve this level.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 1.0079 1.0020 1.0098 0.9984 - 1.0097

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Market commentary:

Very quiet start to the week with US markets closed on Monday for the Presidents Day holiday, currency markets have traded on reduce volumes and are mostly unchanged from Friday's levels. European equity markets were mixed to lower, as the withdrawal of the Kraft takeover bid for Unilever saw Unilever shares drop, offsetting gains across industrial stocks. With the US out, investors’ attention has centred on European developments. Political risk remains in focus, outweighing economic developments, with anti EU candidate Maine Le Pen gaining ground on her rivals as she benefits from increasing concerns over security, in the race for the French presidential elections. Across in Germany a new poll showed a drop in support for Chancellor Angela Merkel’s governing party which fell behind the opposition Social Democrats for the first time under hear leadership. In the UK some members of the House of Lords, parliament’s upper house, will seek changes to the draft “Brexit” law allowing the triggering of Article 50 the departure from the EU when it comes before the Lords. Later this week the US  Federal Reserve minutes from its last meeting will be released Thursday, possibly providing some incite as to how members view the new US administration's policies. Also later tonight/tomorrow there will be several speeches by Fed members which will be watched closely for any pointers to the probability of an interest rate hike at the March meeting.

Australia

The Australian dollar has traded sideways since Friday and continues around the 0.7670/95 range vs the USD. Later today will see the release of the February RBA meeting minutes which are expected to reflect the more upbeat RBA commentary of late. Also of a positive note was a report released by Deutsche Bank suggesting that the increase in commodity prices would continue to reduce the current account deficit as an export led recovery got underway. The surging demand and higher price for iron ore and coal is estimated to see an increase in exports as a share of GDP from 21.2%  to 22% in the first quarter of this year and this would be reflected in an increase in the Australian dollar against the USD to the 0.80 level and above.  The Australian dollar has already enjoyed an increase of over 6.5% against the US unit since the beginning of the year. Certainly this positive view is also partly shared by the RBA in some of its comments last week and although we are positive on a rise for the Australian dollar, the 0.80 level is a way off and it has had considerable trouble staying above the 0.77 mark. We look for gradual appreciation over the next 3 months or so as economic data continues to improve. RBA policy meeting minutes released later today, will be inspected for any change in monetary policy stance.

New Zealand

The New Zealand dollar is largely unchanged from the end of last week, sitting in the 0.7175/95 zone vs the USD, remains underpinned by continuing solid local data. There is another Dairy auction on Wednesday morning which should continue with the trend of firm prices thus providing New Zealand dollar support. However if the US economy continues to improve, the Trump tax policy (cut) is positive and the Fed is more bullish on rate rises, this will apply pressure on the New Zealand dollar, especially with the RBNZ indicating at its last MPS that it saw no need for rate increases. Potential exists for a move back to the 0.7000 region over the next few weeks.

United States

US markets continue to be positive, with US equities making new highs and the US holding gains against most of its trading partners. Data continues to show an economy improving and if the Trump tax policy is as expected, should add further fuel to the recovery. A rate rise for March is still very much on the cards as indicated by the Yellen testimony before Congress last week and any further confirmation of this in speeches from Fed board members this week would rise the rate hike possibility to a 50/50 call and would push the USD higher. Although the first month of the new administration has been rocky, the political situation in the US is more settled than that of the Eurozone, as recent polls show a narrowing of the lead on incumbent governing parties in both France, Germany in the upcoming elections. This is not expected to change in the short term and we look for continuing USD strength.

Europe

The EUR has improved against the USD since last week but at currently 1.0609 is lower than the 1.0678 seen late last week as European political news continues to be negative for the EUR. The Greek problem continues to rumble on, with Eurozone finance ministers at a meeting on Monday declined to disburse further Greek aid payments quickly, with Athens and its creditors agreeing to more discussions over the coming week. As part of the deal the Greek government will legislate measures which are fiscally neutral, but will not institute any additional austerity measures. Bailout funds will not be released until a set of prior conditions are met. German PPI data released yesterday was better than expected at up 0.7% (expected 0.2%) and later this week will see Eurozone February consumer confidence and PMI data.

United Kingdom

The “Brexit” debate continues to grind its way through the system with it now passing through the House of Lords. Once this is passed the timetable is most likely a triggering of Article 50 by the end of next month and a two year process of exit negotiations with the EU from that date. The GBP has been holding firm after rallying last week to a high of 1.2481 on the USD. The BoE Governor Mark Carney has warned of his concerns around consumer spending and these were somewhat justified by last week's drop of 0.2% for January (December figures were revised down to -2.2%) retail sales. There may be further indications of the BoE Governors views on rates as he testifies before the UK Treasury Select Committee on the February inflation report later tonight.  The GBP continues to strengthen against the EUR climbing from a low last week of 1.1641 to around 1.1763 currently. Next resistance is at the 1.1828/30 level seen early last week.

Japan

The JPY is h The JPY is holding steady against the USD , now around 113.40 and with little in the way of economic data looks set in a 111.50-115.62 range. A breakout on either side would give new direction but any such move is unlikely to come before the release of the FOMC minutes on Thursday. The JPY remains the currency of choice for safe-haven hunters but this awaits a further bout of volatility in Europe or US for these flows to reignite. olding steady against the USD , now around 113.40 and with little in the way of economic data looks set in a 111.50-115.62 range. A breakout on either side would give new direction but any such move is unlikely to come before the release of the FOMC minutes on Thursday. The JPY remains the currency of choice for safe-haven hunters but this awaits a further bout of volatility in Europe or US for these flows to reignite.

Canada

Little news from Canada over the last few days after the ratifying of the Canada/EU trade agreement. The Canadian dollar has weakened against the USD from 1.3080 last week to currently trading around the 1.3136 level. Value for the CAD will largely be determined by USD movements this week given the release of FOMC meeting minutes and potential for the new Trump tax policy.

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Source: CoinDesk

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Howard Willcox is a currency analyst with Direct FX You can contact him here »

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