NZD remains near 6 month highs against the USD with momentum still to the upside; NZD also continues to gain support over the AUD, trading to a Friday high of 0.9345; AUDUSD remained supported throughout last week

By Neven Fisher*:

Equity markets remained positive over the week with the DOW up slightly to 25219 and the S&P 500 back up to 2732. Earlier levels over 25400 almost seem inevitable as Stocks continue the upward trend from the February 09 low, a huge turn around after seeing record breaking falls recently.

We saw another week of the greenback falling away with higher than expected CPI inflation reports pushing currency prices to highs. The US Dollar hitting a 3 year low over the week the US Dollar Index trading at 89.12 as volatility in the markets should continue for a while yet. Growth in the United States is on the improve as tax cuts should push the economy higher along with massive infrastructure plans which will in turn push commodities higher, the stagnant US economy looks to have shaken off its 10 year “lull” –markets watch this space with anticipation. US inflation surprised the markets to the upside surpassing expectations of 1.9% to print at 2.1% and 0.5% for the month- well above the 0.3% expected. This confirmed fears of an expected faster increase in rate hikes triggered by the earlier non-farm payroll report.

The New Zealand Dollar traded to a new high or 0.7430 while the Australian Dollar also regained the previous week’s losses to top out just shy of 0.8000 Thursday. The EURO and British Pound also gained ground against the weak Greenback. US Retail Sales published early Saturday morning to show excellent numbers and push all the major currencies off highs to close the week.

Major Announcements last week:

  • US CPI 0.5% vs 0.3% expected
  • US Retail Sales -0.3% vs 0.2% expected
  • Australian Employment Change 16.0k vs 15.3k
  • US PPI 0.4% vs 0.4% expected
  • UK Retail Sales 0.1% vs 0.5% expected
  • US Building Permits 1.40m vs 1.29m expected

NZD/USD

The New Zealand Dollar has out-muscled the US Dollar again over the last few days. Remaining at near 6 month highs it remains popular through most trading sessions as investors remain optimistic. Late Friday saw a slight return to normality after the US Building Permits came in better than expected dropping the kiwi back half a cent to trade around 0.7400 the figure at the NY close to the week. Momentum is still seen to the upside for the NZD with Global Dairy Trade Auctions (GDT) tonight expected to be positive for dairy Farmers and give the kiwi further support leading into the Retail Sales Friday. Buyers of USD should consider at current levels with markets still volatile, anything could eventuate.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7370 0.7350 0.7409 0.7247-0.7435

NZD/AUD (AUD/NZD)

The New Zealand Dollar continues to gain support over the Australian dollar trading to a high Friday of 0.9345 (1.0700) trading through long term resistance of 0.9230 (1.0835) to end the week at the high. Monday saw the AUD reverse prior losses back to 0.9320 during light US Holiday trading. Locally it’s a quiet week for the kiwi with only Retail Sales Friday of real note with Australian Monetary Policy Minutes Meeting today, investors buying AUD should consider prices above 0.9250 as these levels historically never last.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9310 0.9308 0.9345 0.9226-0.9354
AUD / NZD 1.0741 1.0743 1.0700 1.0690-1.0839

NZD/GBP (GBP/NZD)

The New Zealand Dollar (NZD) –British Pound (GBP) continued to trade in a tight band over the week. UK retail Sales printed Friday worse than was expected giving NZD further strength, the 3rd week in  succession the pound has been on the back foot against the New Zealand Dollar. Inflation hearing and Unemployment rate to print later in the week, expect these to give the GBP a much needed possible breakout at current levels.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5260 0.5243 0.5280 0.5234-0.5279
GBP / NZD 1.9011 1.8940 1.9073 1.8943-1.9106

 NZD/CAD

The Canadian Dollar got no respite last week based on a surging NZD, the CAD stuck in a NZD updraft it made little effort to reverse NZD weekly gains. Posting a new 9 month high more gains look ominous. This week it looks set to possibly break stern resistance at 0.9415 if the CAD Retail Sales and monthly CPI offer no support.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9250 0.9230 0.9285 0.9125-0.9284

NZD/EURO (EURO/NZD)

The New Zealand Dollar (NZD) pushed slightly higher over the EURO (EUR) during the week posting a small gain of 22 points as the EUR lost ground Friday in a risk on market to trade at 0.5956 (1.6790). Markets look towards Wednesdays German Manufacturing figures for further direction. Resistance for the pair looks to be 0.6000 the figure if further upside eventuates.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5936 0.5930 0.5963 0.5883-0.5963
EUR/NZD 1.6846 1.6780 1.6863 1.6771-1.6999

NZD/YEN

The Japanese Yen (JPY) / New Zealand Dollar (NZD) traded sideways most of the week briefly sliding to 77.70 during NY session Wednesday it rebounded to trade back at the weekly open of 78.80. After NZD inflation expectation figures published well could see the New Zealand Dollar strengthen further back to post 2nd February levels of 80.40 over the short term especially if next week’s NZ Retail Sales figures are favorable.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 78.58 78.30 78.80 77.70-78.99

AUD/USD

The Australian Dollar remained supported throughout last week closing just shy of 1 cent (90 points) higher against the US Dollar during heavy volume trading to close at 0.7900. At one point trading just shy of the magical 0.8000 number AUD reversed sharply to 0.7920 Friday coming off its high after US Building Permit figures were substantially better than expectation. Australian Unemployment figures were bang on expectations of 5.5% but offered no real boost for the AUD. RBA Monetary Minutes are released Tuesday expect further support in the Australian Dollar long term.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7909 0.7860 0.7980 0.7777-0.7988

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) – Great British Pound (GBP) has been “bouncy” over the week, closing business at where it started around 0.5643 (1.7723) level. Earlier price action hit 0.5680 (1.7605) mid- term support as mentioned in an earlier commentary but rebounded to 0.5620 (1.7807) the low before the Australian Dollar gained support closing in a confident tone. BoE speak tomorrow with Inflation Report Hearing later in the week should give the pound further stability.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5650 0.5620 0.5665 0.5621-0.5689
GBP / AUD 1.7700 1.7652 1.7795 1.7577-1.7792

AUD/EURO (EURO/AUD)

The Australian Dollar – EURO (AUD/EUR) has seen very little action over the past week- two week period. The pair currently trades at 0.6377 (1.5680) the same price it was at last weekend’s close and the week before- odd. Further direction is clearly needed as the EUR tries to break downside support of 0.6329 (1.5800) last seen in January 2016. This week’s German Manufacturing will be key Wednesday.

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6377 0.6361 0.6390 0.6324-0.6406
EUR/AUD 1.5681 1.5720 1.5650 1.5610-1.5813

AUD/YEN

The Australian Dollar lost ground against the Japanese Yen trading through support of 84.30 late last week as it still remains out of favor with investors and trades at a May 2017 levels around 84.20. One may expect a bounce back at some stage by the Australian Dollar given the speed of the recent decline, Aussie RBA Bullock speaks today and must impress.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 84.40 83.90 84.80 83.35-85.59

AUD/CAD

The Australian Dollar rose against the Canadian Dollar, starting the week at 0.9830 it rallied through to a high of 0.9950 where it currently sits just shy of Tuesday. Crude Oil is up again to 62.20 but has failed to make an impact yet on the Canadian Dollar, perhaps the US Holiday volatility a factor, this current bullish NZD trend looks well established.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9940 0.9920 1.0000 0.9834-0.9951

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Market commentary:

Equity markets remained positive over the week with the DOW up slightly to 25219 and the S&P 500 back up to 2732. Earlier levels over 25400 almost seem inevitable as Stocks continue the upward trend from the February 09 low, a huge turn around after seeing record breaking falls recently.

We saw another week of the greenback falling away with higher than expected CPI inflation reports pushing currency prices to highs. The US Dollar hitting a 3 year low over the week the US Dollar Index trading at 89.12 as volatility in the markets should continue for a while yet. Growth in the United States is on the improve as tax cuts should push the economy higher along with massive infrastructure plans which will in turn push commodities higher, the stagnant US economy looks to have shaken off its 10 year “lull” –markets watch this space with anticipation. US inflation surprised the markets to the upside surpassing expectations of 1.9% to print at 2.1% and 0.5% for the month- well above the 0.3% expected. This confirmed fears of an expected faster increase in rate hikes triggered by the earlier non-farm payroll report.

The New Zealand Dollar traded to a new high or 0.7430 while the Australian Dollar also regained the previous week’s losses to top out just shy of 0.8000 Thursday. The EURO and British Pound also gained ground against the weak Greenback. US Retail Sales published early Saturday morning to show excellent numbers and push all the major currencies off highs to close the week.

Australia

The Australian Dollar continued its run north late last week pushing past key resistance at 0.7960 to post a fresh high of 0.7988. Saturday US Building Permits showed a substantial increase in the number of annualised new residential building permits to reverse the Australian Dollar back to low 0.7900’s putting it on the back foot. Tuesday sees Monetary Policy Minutes – expect the RBA to talk up growth here, quarterly wage growth prints Wednesday.

New Zealand

The New Zealand Dollar improved on early week gains over the US Dollar Friday as it traded as high as 0.7430 before bouncing lower. Ending a 5 day bullish streak better than expected US Building Permits printed just prior to closing the week, spooking investors and bringing the New Zealand Dollar back down to earth to 0.7380 in heavy Volume trading. The US Holiday Monday should stunt any real movement early in the week with NZ quarterly Producer Price Index printing tomorrow in what looks to be a quiet week locally.

United States

The US dollar rebounded late Friday/Saturday after a week of US broad-based weakness. US Building permits printed 1.4m over the 1.29m expectation lifting the US Dollar fortunes to end the week on a positive tone. The US dollar weakness is largely due to tax reform and fiscal growth, this seems to outweigh any concerns of higher inflation in the US highlighting a more active Fed. Normally higher US bond yields such as last week’s 2.92 high in the 10 year price boosts the US Dollar but with distorted quantitive easing by central banks this has played havoc on interest rates being less reliable and a poor indicator of exchange rate movement. FOMC meeting minutes Friday along with FOMC members speeches to follow to close the week.

Europe

The EUR suffered the same fate as other pairs Friday after US Building Permits printed higher than the expected figures the EUR recouping some of the losses incurred earlier in the week. Even though it traded as high as 1.2555 Friday it still closed the week 190 points (nearly 2 cents) stranger than the greenback. US Holiday Monday should bring about low volumes and with little movement. Later in the week German Manufacturing will be the highlight of the EUR week with figures expected to show further expansion and improve EUR towards last week’s high of 1.2555

United Kingdom

The Great British Pound outperformed Friday posting a new high of 1.4140 pushing past the recent target level of 1.4070 with ease against the greenback during heavy trading during NY. US Building Permits printed positive taking GBP off the high, assisting was GBP Retail Sales figures printing at 0.1% versus 0.5% expected putting the GBP on the back foot leading into the weekend. With a rate hike certainly on the cards now we should expect the GBP to strengthen further over the coming days if this week’s inflation hearing and Unemployment rate prints well.

Japan

The Japanese Yen continues its bullish drive against the US Dollar through Friday last week before being ousted by a fresh faced US Dollar after US Building Permits printed well. Generally the JPY looks healthy enough tracking over 6c better the US Dollar since the start of the year price which was around 112.00. January’s Japanese trade balance came in at a deficit of US9B which was well below the expected 10.2B the market was expecting. Generally the numbers show a robust economy as the world still demands Japanese products. No Japanese local data to be released this week.

Canada

The Canadian Dollar made up made small gains last week mainly trading in a tight range until US figures pushed it out of favor with investors.The CAD closed the week with worse than expected Manufacturing monthly sales of -0.3% over an expectation of 0.2% p  Monday the Canadian Dollar has opened well as crude oil prices are up over 1% the high over the last 10 days. This week sees Core Retail Sales and monthly CPI figures

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NZD
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