USD kicked of the week around 90.10 on the US Dollar Index, with support still lying with the USD; NZD was rejected from 0.7300 early last week to be sold off in risk off markets; NZD continued its rise against the AUD

By Neven Fisher*:

The long Easter weekend made for quiet markets, Equities and Commodity markets were both closed Good Friday. FX markets ticked along behind the scenes while in thin trading conditions. Trade talks between the US and China continued dominating the news as a potential for an intl trade war rises. Initially President Trump was open to negotiations earlier last week bringing risk to the table and giving markets initial optimism. This was soon transposed as buyers sought the US Dollar (USD) and safe haven investments with fresh discussions spooking markets again. President Trump highlighted he was not going to be an easy target initially announcing he was to tariff over 60 Billion worth of imported Chinese products on March 22. China retaliated punishing American Foods, wine, fruits and frozen pork with their own 25% tariffs on around 128 products. This is in direct response to what President Trump calls intellectual property theft with technology transfer policies requiring companies to share technology with Chinese companies to have business interests in China. President Trump claims these rules in place are unfair and allow the China government to abuse American technology. Where it could get super ugly is if the recent moves could push China to introduce taxes on American firms which rely on Chinese manufacturing to keep costs down, as we know wages in china are lower than they are in the US. This week we should see further cages rattled but suspect that China may be interested to calm things down with a proper meeting rather than continue with mudslinging. This week should see plenty of volatility also with the Reserve Bank of Australia (RBA) announcing their cash rate later today and US Non-Farm Payroll at the end of the week. The US Dollar index should continue to trade above the 90.00 handle unless we get a correction lower based on renewed risk sentiment.

Major Announcements last week:

  • US and China continue trade Talks
  • NZ Trade Balance prints 217k 
  • US CB Consumer Confidence prints 127.7 based on 131.2 expectation
  • US Q GDP 2.9% over expected 2.7%
  • German prelim CPI m/m releases at 0.4% worse than 0.5% expected
  • Canadian m/m GDP prints at -0.1% worse than 0.1% expected
  • US Unemployment Claims 215k over 230k expectation

NZD/USD

The New Zealand Dollar (NZD) was rejected from 0.7300 early last week to be sold off in risk off markets down to 0.7180 against the US Dollar (USD). With little local data to be excited about or boost the kiwi, markets have watched as equities and commodities have traded lower pre, and post, Easter break with news of further US and China trade talks negatively impacting optimism. US ISM Manufacturing has printed worse than expected at 59.3 as opposed to 60.1 and had a benign effect on prices Monday. US Non-Farm Payroll is set to publish later in the week, markets most important announcement of the month, if it prints better than the expected 190k as it did last month this could bring some much needed stability back to markets. The pair could test 0.7150 this week as it trades well under the 50 days moving average and most vitally if trade wars don’t significantly improve.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7210 0.7158 0.7300 0.7189-0.7297

NZD/AUD (AUD/NZD)

The New Zealand Dollar (NZD) continued its rise against the Australian Dollar (AUD) to 0.9470 (1.0560) as the Aussie (AUD) fall away sharply in a market driven by risk and sentiment. The RBA will announce their cash rate later today (Tuesday) at 1.5% with no surprises expected, with Retail Sales, Building Approvals and Trade Balance likely to shift prices later in the week with nothing significant out of NZ except the Global Dairy Auction Wednesday. The NZD/AUD has consolidated around 0.9420 (1.0620) since its open Easter Monday and should continue to test the top side if Aussie data is weak and the RBA statement is dovish.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9385 0.9300 0.9433 0.9373-0.9478
AUD / NZD 1.0655 1.0600 1.0750 1.0551-1.0669

NZD/GBP (GBP/NZD)

The British Pound (GBP) traded predominantly sideways over the week against the New Zealand Dollar (NZD) closing at 0.5152 (1.9410). In thin pre-Easter markets the UK current account published at -18.4B as opposed to the expected -24.0B expectation, this was the lowest since 2011, citing rising earnings from investments and higher foreign levels of investment in the UK. The yearly current account deficit is -83.0B which is 4.1% of GDP for the 2017 year. A quiet week for the NZ economy but with UK manufacturing and construction figures to be released we could see further movement to the downside with 0.5100 (1.9650) to be tested.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5130 0.5092 0.5168 0.5108-0.5882
GBP / NZD 1.9493 1.9350 1.9640 1.9356-1.9577

 NZD/CAD

The New Zealand Dollar (NZD) continued its bullish momentum over the Canadian Dollar (CAD) last week but was delayed early on by a risk off market allowing the CAD to make up ground over the NZD in light market trading. Pushing as high as 0.9410 early the kiwi dropped back to 0.9270 before closing the week at 0.9322. This week economically sees Canadian Trade Balance and Employment figures, along with the unemployment rate print Friday. Expect the pair to be volatile with US NFP (Non-Farm Payroll) as well later in the week. Upside support for the kiwi still remains, possibly back to the early March high of 0.9500

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9295 0.9250 0.9412 0.9281-0.9380

NZD/EURO (EURO/NZD)

The EURO (EUR) traded mainly sideways against the New Zealand Dollar (NZD) over the week but dropped to a low of 0.5835 (1.7135) in pre-Easter markets before pushing back to consolidate around the 0.5885 (1.7000) mark. The EUR has opened well, the NZD is on the back foot with equities falling away and dropping investor confidence with it. This week will be driven by offshore markets and US data with only a small amount of data to publish- German Retail Sales and EURO CPI. The bearish trend is still in place as we see a reasonable probability this week the pair may test 0.5820 (1.7200)

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5858 0.5828 0.5883 0.58364-0.5882
EUR/NZD 1.7070 1.7000 1.7160 1.7001-1.7140

NZD/YEN

Early last week we saw risk return to markets pushing up the NZD/JPY pair early to 77.15 before settling around 76.80 for most of the remaining week. We never quite did see 81.50 levels pre- Easter in the pair, we do however see further support for the New Zealand Dollar (NZD) heading into the US Non-Farm-Payroll figure later in the week as risk should return to the markets. We have NZ Business confidence Wednesday and another Global Dairy Auction this week.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 76.35 75.60 77.15 76.17-77.18

AUD/USD

The Australian Dollar (AUD) reversed its early rise to 0.7760 falling back to 0.7640 after Trump rattled markets with further trade talks between China and the US not going well. Risk markets soon tuned to risk aversion and the Australian Dollar (AUD) has been under pressure since. Opening this week lower it is currently testing support at 0.7640 with threats of breaking below this level down to 0.7500, the December 2017 low. The US and China are edging closer to a full on trade war after the Chinese put a 25% tariff on 128 US goods including wine, fruit and nuts. President Trump is expected to elaborate later in the week on the tariffs on 60 Billion worth of annual imported Chinese goods he announced on March 22. Markets seen to be hanging off all related news. Today we have RBA cash rate which will be unchanged at 1.5% and later in the week US Non-Farm Payroll. All aboard the best ride in the park.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7680 0.7640 0.7750 0.7644-0.7743

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) pulled back ground last week against a buoyant British Pound (GBP) closing the week at 0.5485 (1.8230) up on the previous weeks close of 0.5445 (1.8365). UK Current Account published at -18.4B as opposed to the expected -24.0B expectation, this was the lowest since 2011, citing rising earnings from investments and higher foreign levels of investment in the UK. The RBA release their Cash Rate Tuesday which is expected to stay unchanged at 1.5% with a 0% probability of a rise. Monthly Australian Retail Sales and Trade Balance publish later in the week, look for a break back to the late March low of 0.5390 (1.8550) if the Aussie loses further support.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5465 0.5405 0.5490 0.6177-0.6255
GBP / AUD 1.8298 1.8210 1.8500 1.8220-1.8506

AUD/EURO (EURO/AUD)

The EURO (EUR) continues to gain strength against the Australian Dollar (AUD) pushing past the mid-January 2016 support of 0.6225 (1.6065) to post a new low of 0.6517 (1.6085) Markets were spooked late in the week with continued trade talks dampening earlier risk appetite, the pair was soon back to 0.6250 (1.6000) as President Trump created more ripples. This week’s movement will also be guided around by overseas influences and risk with no significant data to publish just German Retail Sales and CPI. We expect the pair to continue through to 0.6150 (1.6250)

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6240 0.6180 0.6258 0.6177-0.6255
EUR/AUD 1.6025 1.5980 1.6180 1.5988-1.6190

AUD/YEN

The Australian Dollar (AUD) has been marginally stronger than the Japanese Jen (JPY) over the past week coming off the low of 80.60 in risk averse markets. Ranging around the 81.70 area for most of the week the Aussie needs some strong sessions to stay above 81.60 support. The RBA release their Cash Rate Tuesday which is expected to stay unchanged at 1.5% with a 0% probability of a rise. Monthly Australian Retail Sales and Trade Balance publish later in the week, look for a break to 82.60

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 81.31 80.50 82.00 80.80-81.99

AUD/CAD

The Canadian Dollar (CAD) continued its charge against the Australian Dollar (AUD) pushing the pair down to a low of 0.9875 where it consolidated just north of this level for most of the week. This is the third straight week the Australian Dollar (AUD) has dipped in value against the CAD, this week looks no different as it may look to test key support around 0.9780. Today’s RBA cash rate announcement followed by the RBA statement will be important for stunting further downside.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9898 0.9870 1.000 0.9875-0.9939

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Market commentary:

The long Easter weekend made for quiet markets, Equities and Commodity markets were both closed Good Friday. FX markets ticked along behind the scenes while in thin trading conditions. Trade talks between the US and China continued dominating the news as a potential for an intl "trade war rises. Initially President Trump was open to negotiations earlier last week bringing risk to the table and giving markets initial optimism. This was soon transposed as buyers sought the US Dollar (USD) and safe haven investments with fresh discussions spooking markets again. President Trump highlighted he was not going to be an easy target initially announcing he was to tariff over 60 Billion worth of imported Chinese products on March 22. China retaliated punishing American Foods, wine, fruits and frozen pork with their own 25% tariffs on around 128 products. This is in direct response to what President Trump calls intellectual property theft with technology transfer policies requiring companies to share technology with Chinese companies to have business interests in China. President Trump claims these rules in place are unfair and allow the China government to abuse American technology. Where it could get super ugly is if the recent moves could push China to introduce taxes on American firms which rely on Chinese manufacturing to keep costs down, as we know wages in china are lower than they are in the US. This week we should see further cages rattled but suspect that China may be interested to calm things down with a proper meeting rather than continue with mudslinging. This week should see plenty of volatility also with the Reserve Bank of Australia (RBA) announcing their cash rate later today and US Non-Farm Payroll at the end of the week. The US Dollar index should continue to trade above the 90.00 handle unless we get a correction lower based on renewed risk sentiment.

Australia

The Australian Dollar (AUD) remains one of weakest of the G10 players losing strength across the board during volatile market trading prior to Easter break. Equities and commodities are significantly weaker as risk sentiment dropped the S & P over 2%, the DOW also coming off 2% along with the Nasdaq, Trump leading the demise over nasty trade discussions with China taking a turn for the worst. The RBA today will keep their cash rate unchanged at 1.5% as governor Low has stipulated several times they are in no rush to raise rates. The following statement will need to be hawkish to support a depreciating Aussie Dollar (AUD). Retail Sales and Building Permits with Trade Balance all release later in the week and should offer resistance for further AUD falls.

New Zealand

The New Zealand economy had a quiet week with limited market makers at the table over Easter Break. Trade Balance printed at 217M better than the expected -100M and ANZ business confidence printed benign. This week we have another Global Dairy Auction, with the index showing down 1.2% on expectations on the 20th March dairy farmers will be expecting a rise in milk prices after earlier prices in the year reflected growth. Ongoing trade talks will be the key mover of the NZD this week with the Trump government looking to continue with tariff talks with China. Markets have hung of every news release, this will continue to affect risk sentiment leading into the US Non-Farm Payroll release Friday.

United States

The US Dollar (USD) kicked of the week around 90.10 on the US Dollar Index, with support still lying with the Dollar (USD) from late last week. Risk in the markets based on current US/China trade talks has been the key mover of prices. President Trump continues to push for further international trade rules and tariffs with China which remain a threat for a possible trade war. Currently the ball is firmly in the USA’s court with China urging trade talks, they have had no real response from the US in terms of a resolution meeting. Markets remain nervous a trade war could be close with the door closing on what could end in long term damage between the two countries. Trump has declared the (DACA) Deferred Action for Childhood Arrivals "dead" saying he will press congress to immediately pass legislation to close the borders between the US and Mexico. A program introduced by the Obama administration, Trump said we must stop the inflow of drugs and people as our country is being stolen. Congress is unable to pass immediate legislation as law makers are on their "spring recess". Non-Farm Payroll is released at the end of the week which is widely awaited by markets, expectations are for a better than expected number to support other recent US positive data releases.

Europe

The EURO (EUR) has closed the week lower against the US Dollar (USD) at 1.2320 in thin Easter trading conditions. Early last week it soured to a fresh high of 1.2470 in risk on markets, but this level could not be sustained and the EURO (EUR) dropped back to 1.2280. The pair started the week on a positive note advancing to 1.2340 but fall back as equities came under selling pressures and renewed concerns of US/China trade wars. China announced Sunday that they would tariff 25% on hundreds of US agricultural products. The week should end in a flurry of activity as it normally does when US Non-Farm Payroll numbers publish.

United Kingdom

The British Pound (GBP) has not been able to sustain its recovery last week against a buoyant USD. Early on it made a positive statement in risk on markets as it rallied to a high of 1.4245 before dropping back to hold above the crucial 1.4000 to trade at 1.4050 in holiday thinned markets. The current account printed -18.4B but failed to create any GBP interest leading into Easter. This week Construction and Manufacturing figures are published along with BoE governor Carney speaking Saturday. Expect fresh momentum in prices if data outperforms. The UK is still coming to terms with Brexit realities with large bills piling up and border issues still to be resolved. With an expectation on the BoE (Bank of England) to hike rates twice in 2018 we should see a fresh wave of bullish moves higher.

Japan

The Japanese Yen (JPY) continues to lose ground over the US Dollar (USD) as it comes off the low of 104.60 trading back over 106.30. Easter Holidays made for light trading conditions with the market makers still to return to the markets. Last week the Japanese yearly Core CPI printed better than expected at 0.8% and gave the JPY a boost but the general theme was risk on as President Trump drove buyers to risk currencies after China/US trade discussions turned positive, the JPY slipped lower. The Japanese Yen has opened lower post Easter as the Tanken survey found large manufacturers less confident in the first quarter of 2018 where most were worried about the strength of the JPY. Household spending is released at the end of the week otherwise another quiet week for the Japan.

Canada

The Canadian Dollar (CAD) broke the US Dollar (USD) momentum late last week dropping out of its current bearish range channel. This is a success for the Canadian Dollar (CAD) after weeks of continued weakness against the greenback. The Canadian Dollar (CAD) is not yet in the clear as it will need buyer support over the week to avoid trading back at 1.3115, currently around the 1.2900 level the pair still looks bullish trading well above the 40 days moving average. Monday the Canadian Dollar gained a little support with a lack of US buyers in the market pushing lower to 1.2870. With Global markets shut down over Easter the pair looks happy to keep within current ranges and wait for this week’s Non-Farm payroll figure for further direction. Technically we suspect buyers could push the pair back over the psychological 1.3000 mark.

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