NZD dropped lower off Friday’s high of 0.7375 to close the week against the USD at 0.7350; investors turned to risk aversion late in the week after missile strikes on Syria became a reality; NZD is finally weaker against the AUD

By Neven Fisher*:

Markets closed the week relatively uneventfully with no significant data publishing to shift things around. Investors took on risk earlier with equities and commodity markets all making gains, but with Syrian air strikes the headline towards the end of the week markets turned to the safe haven as gold came off its low trading back at 1,343. Heated trade discussions continued between the US and China with China aiming their efforts directly at US agriculture. Beijing has promised to retaliate with more tariffs aimed at the US agriculture sector which includes soy bean, which could have a massive detrimental effect on US farmers. Reports are that President Trump may be contemplating a move back into TPP (Trans Pacific Partnership). When US withdrew from the TPP this was damaging to US agriculture, but with the Chinese on the front foot with current trade negotiations this could spell total disaster for US farmers. The US, France and UK Friday night launched 105 missiles into Syria targeting chemical weapons facilities with reports suggesting to good effect taking out a select few. There are an estimated 50 warehouses in Syria which contain storage of chemical weapons after the 2013 Syria chemical weapons disarmament deal only partially dismantled existing stockpiles. So one would suspect that with the ease of creating further chemical weapons and the stash currently held, the job done by the US, France and UK is only partially completed. Interestingly President Trump never had authority from congress and Theresa May never consulted parliament prior to launching the air strikes. Nine FOMC members speak this week with US Core Retail Sales tomorrow which will give us clues as to further Dollar direction for 2018.

Major Announcements last week:

  • Syrian airstrikes put the US Dollar on the backfoot
  • US Equities recover off lows
  • Trump government rethinks re- entering TPP
  • US University of Michigan prints at 97.8 compared to 100.6 expected
  • Crude Oil stocks publishes at 3.3M Barrels over -.06M expected boosting CAD
  • US Core PPI comes in at 0.3% with 0.1% expected

NZD/USD

The New Zealand Dollar (NZD) dropped lower off Friday’s high of 0.7375 to close the week against the US Dollar (USD) at 0.7350 in a shaken market. Investors turned to risk aversion late in the week after missile strikes on Syria became a reality, UK, France and the US destroying a number of chemical facilities. A quiet week for data in New Zealand with only the Global Dairy Auction (GDT) Wednesday and quarterly CPI Thursday. Farmers will be expecting another strong number in the Whole Milk Powder despite continued weakening prices in the main index since 21 February. Indications are still to the upside for the New Zealand Dollar (NZD) with the 40 day moving average still showing a possible rise back to 0.7400.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7355 0.7320 0.7430 0.7324-0.7395

NZD/AUD (AUD/NZD)

The New Zealand Dollar (NZD) is finally weaker against the Australian Dollar (AUD) with the price drifting back to 0.9440 (1.0590) Monday. Perhaps we have seen the top and the start of a possible slide back to what we consider a sustainable realistic value in the pair. Aussie Monetary Minutes of its April meeting were released in the past hour but have had little impact, The RBA re-iterate the next move in rates will likely be up reflecting an improvement in the Australian Economy. The last cash rate rise was 7 years ago. The RBA will carefully calculate the timing of the next rise as this will have a big effect with pressured household debt and low wage growth. Australian unemployment rate is published on Thursday; this is a pivotal announcement and a significant gauge on the health of the economy. We are still in a bullish cycle with prices still reflecting an uptrend, we will need to break below 0.9390 (1.0650) before we get to excited of a turn to the downside in the pair.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9463 0.9400 0.9534 0.9440-0.9534
AUD / NZD 1.0560 1.0488 1.0638 1.0489-1.0593

NZD/GBP (GBP/NZD)

The British Pound (GBP) came of the high of 0.5216 (1.9170) midweek versus the New Zealand Dollar (NZD) as risk came back to the table. UK manufacturing production for February published lower than expected at -.02% based on expectation of 0.2% and surprised markets with the first drop in nearly a year, suggesting a possible slowdown. Unemployment rate prints tonight with yearly CPI tomorrow and Retail Sales Thursday should offer the GBP further support with 0.5100 (1.9607) now in sight. Buyers of the Pound should consider current levels with the Pound gathering pace.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5130 0.5042 0.5215 0.5127-0.5216
GBP / NZD 1.9493 1.9174 1.9830 1.9173-1.9505

 NZD/CAD

The Canadian Dollar (CAD) remained choppy against the New Zealand Dollar (NZD) to close the week around the 0.9270 level. The Canadian Dollar (CAD) is offering good value currently following a long period of concern with Nafta. Risks now seem to be diminishing for the Canadian Dollar (CAD) with Mexico, Canada and US making encouraging signals of putting together a potential deal. Crude Oil helped has been higher over the week and boosted the CAD in pockets. The prior low of 0.9240 is still holding but we see further upside in the pair with the New Zealand Dollar robust for the moment. If BoC hikes rates Thursday this changes everything.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9246 0.9185 0.9515 0.9240-0.9322

NZD/EURO (EURO/NZD)

The NZDEUR has reversed last week’s gains rebounding off the high of 0.6000 (1.6670) Friday to close at 0.5966 (1.6760). Monday saw further support for the Euro (EUR) as the cross retreated lower to 0.5930 (1.6860). Tonight we have German economic sentiment and another Global Dairy Auction (GDT) Wednesday. Given the bounce off key physiological resistance of 0.6000 we could see further weakness in the kiwi, levels here around 0.5950 offer good buying.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5940 0.5830 0.6000 0.5931-0.5997
EUR/NZD 1.6835 1.6680 1.7155 1.6675-1.6860

NZD/YEN

The New Zealand Dollar (NZD) came off its high of 79.60 against the Japanese Yen (JPY) Friday after buyers of risk left the market for safer investments. The cross closed the week at 79.00 after opening around 77.60 the third bullish week from the prior low of 75.60 23rd March. Trade Balance and Core yearly CPI is published later in the week, we expect a retest of 79.00 with 78.50 offering solid support.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 79.74 77.40 79.20 78.39-79.61

AUD/USD

The Australian Dollar (AUD) broke 0.7800 briefly Friday before slipping lower to 0.7765 where it closed the week. Equities are back in positive territory this week after losing ground last week as investors buy back risk. Trading back around the 0.7780 level we see a possible retest to 0.7800 then 0.7900 if risk sentiment continues this week. The RBA have today reiterate the next move in rates will likely be up reflecting an improvement in the Australian Economy. The last cash rate rise was 7 years ago. This is a pivotal announcement and a significant gauge on the health of the economy. Consumer confidence is released later today with the index falling over the last 3 weeks to its lowest level since mid-December underpinned by rising trade tensions between China and the US. Buyers of US Dollar (USD) may be getting excited with a rise back towards 0.8000, don’t get to greedy and consider current levels, remember last week we were buying the Dollar at 0.7650 in comparison.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7770 0.7640 0.7915 0.7721-0.7810

AUD/GBP (GBP/AUD) 

The British Pound (GBP), Australian Dollar (AUD) pair, looks to be making a surge for 0.5405 (1.8500) as it trades at 0.5430 (1.8420) currently. UK unemployment rate prints tonight, yearly CPI tomorrow and Retail Sales Thursday should offer further upside for the Pound. Opportunities for the Aussie to trade back to mid-2017 levels of 0.6270 (1.5950) are fading. The long term physiological level of 2.000 looks more likely as things look increasingly positive for the UK economy.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5418 0.5290 0.5555 0.5419-0.5483
GBP / AUD 1.84587 1.8000 1.8900 1.8239-1.8453

AUD/EURO (EURO/AUD)

The EURO (EUR) has reversed last week’s losses pushing off the high of 0.6340 (1.5770) travelling to 0.6273 (1.5940) against the struggling Australian Dollar (AUD). Aussie monetary policy minutes is published today as markets predict the comments should offer the Aussie further support leading into the Australian unemployment rate Friday. Technically the pair is trading above the 40 day moving average but looks shaky at the current level of 0.6280 (1.5920). Look for a break higher back to 0.6400 (1.5620).

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6275 0.6173 0.6395 0.6252-0.6338
EUR/AUD 1.5936 1.5640 1.6200 1.5777-1.5994

AUD/YEN

The Australian Dollar (AUD) travelled to a new high Thursday of 83.30 against the Japanese Yen (JPY) after risk markets initially pushed the pair to fresh monthly level. FOMC minutes was generally positive, the Fed saying they would continue as forecast despite ongoing trade war concerns. Buyers were soon into the US Dollar (USD) as risk appetite dissipated strengthening the Yen (JPY) Buyers of JPY should consider current levels through to 84.50 as it looks well capped. The bullish trend from the low of 80.50 looks well intact.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 83.16 80.50 84.50 82.54-84.06

AUD/CAD

The Australian Dollar (AUD) pushed aside Wednesdays high of 83.30 against the Japanese Yen (JPY) late in the week climbing to 84.05. Bank of Japan Haruhiko Kuroda reiterated his positive stance for the Japanese economy, giving the JPY a chance to claw back losses as the pair closed the week at 83.40. This week we have trade balance and core yearly CPI to publish. Buyers of JPY should watch for support of 82.50, if this is broken further downside is expected.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9795 0.9710 0.9900 0.9750-0.9819

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Market commentary:

Markets closed the week relatively uneventfully with no significant data publishing to shift things around. Investors took on risk earlier with equities and commodity markets all making gains, but with Syrian air strikes the headline towards the end of the week markets turned to the safe haven as gold came off its low trading back at 1,343. Heated trade discussions continued between the US and China with China aiming their efforts directly at US agriculture. Beijing has promised to retaliate with more tariffs aimed at the US agriculture sector which includes soy bean, which could have a massive detrimental effect on US farmers. Reports are that President Trump may be contemplating a move back into TPP (Trans Pacific Partnership). When US withdrew from the TPP this was damaging to US agriculture, but with the Chinese on the front foot with current trade negotiations this could spell total disaster for US farmers. The US, France and UK Friday night launched 105 missiles into Syria targeting chemical weapons facilities with reports suggesting to good effect taking out a select few. There are an estimated 50 warehouses in Syria which contain storage of chemical weapons after the 2013 Syria chemical weapons disarmament deal only partially dismantled existing stockpiles. So one would suspect that with the ease of creating further chemical weapons and the stash currently held, the job done by the US, France and UK is only partially completed. Interestingly President Trump never had authority from congress and Theresa May never consulted parliament prior to launching the air strikes. Nine FOMC members speak this week with US Core Retail Sales tomorrow which will give us clues as to further Dollar direction for 2018.

Australia

The Australian Dollar (AUD) made gains last week, even against the New Zealand Dollar (NZD), as it traded higher against its main rivals. Markets reached for safer investments heading into the close of the week as the Syrian Missile situation unfolded taking the Australian Dollar (AUD) off its lows across the board. The RBA’s financial stability review published with a strong bias saying global conditions have remained strong and the Australian economy remains poised. RBA monetary policy minutes is released in the past hour have had little impact. On Thursday we have employment data to digest.

New Zealand

The New Zealand Dollar (NZD) stayed positive over the week making it one of the strongest currencies in a market driven by risk sentiment. Earlier in the week the kiwi set new highs but was soon under pressure as markets sought safer style investments and sold NZD. Threats of Syrian Missile strikes by the US, France and UK governments dropped the kiwi back towards 0.7770 against the US Dollar. New Zealand Medal table at the conclusion to the Commonwealth Games looks like this. Gold 15, Silver 16, Bronze 15 with a total of 46 medals, edging out South Africa who finished on 37 finishing, 5th overall which is a mighty effort. Our most successful Commonwealth Games outside of the two held in New Zealand. I will miss the games on TV. The highlight of the games for me was seeing David Liti hoisting 229kg's above his head in the 105kg plus weightlifting category to win the gold. The NZD this week will again be governed by offshore risks, we expect it to drift lower on the whole.

United States

The US Dollar (USD) was in the spotlight last week dominating currency moves. The US Dollar Index recovered from its near 3 week low of 89.38 to close out the week at 89.72. Rebounding on Syrian Missile attacks, markets took to the US Currency and other safe haven assets. Although the US Dollar made up gains later in the week it remained down on most the weekly open crosses. Post FOMC minutes US policy makers commented that raising rates would continue as forecast despite ongoing trade war signs. This week we have a busy week on the US Calendar with nine Fed members speaking around economic topics of importance which should reflect the tone of the Fed going forward and give the US further support. President Trump might get a slap on the hand this week when he fronts to congress for acting without their approval to release missiles into Syria, a move which has been well received by various markets as the right thing to do in support of earlier suspected chemical attacks on Douma. Crude oil inventory numbers publish Thursday with the number expected to be positive after last week’s 3.3M barrels.

Europe

The EURO (EUR) dropped in value against the US Dollar (USD) midway through last week on risk aversion linked to the Syrian airstrikes but recovered late Friday as concerns diminished and risk returned. Monday saw the EUR spike on the open back to its high of 1.2390 on US Dollar weakness. The Syria situation has ended up hurting the US Dollar as investors pulled the EURO (EUR) north during the European session. The Empire/NY Manufacturing index printed worse than expected at 15.8 as opposed to 19.8 putting the US Dollar (USD) under pressure. Further movement in the pair over the week will be mainly based around risk sentiment and US FOMC members speaking. There are nine speakers this week who will talk on a range of US and global economic issues. We think the EUR should keep its current momentum against the greenback and make a push for 1.2500 then 1.2550 the December 2014 high.

United Kingdom

It seems most market analysts are picking the Pound (GBP) to return to 1.50 against the greenback (USD), this level was last traded during Brexit 19 June 2016 where we saw the Pound travel to 1.5020 early during the voting before it sank to 1.3230 areas by the end of the trading day. Syria threats were quickly shrugged off Monday after UK, France and the US joined forces launching airstrikes into Syria, following reports of chemical attacks in Douma. Theresa May addressed the UK Parliament post strikes with Russia saying if there was another attack on Syria there would be global chaos. The focus this week is with the central banks with potential for a rate hike from the Bank of England (BoE) on the cards next week. This positive sentiment is giving the Pound (GBP) good momentum against the crosses. Currently against the USD Dollar (USD) the pair sits bang on resistance of 1.4340 the high from January 2018, a break through here would almost certainly climb to 1.4500. Unemployment rate prints tonight with yearly CPI tomorrow and Retail Sales Thursday. If these all publish above expectation we could see the 1.45 handle this week.

Japan

Investors purchased the US Dollar (USD) in favour of the Japanese Yen (JPY) late in the week pushing the price to a high or 107.75 in high volume trading conditions. As President Trump tweeted of possible airstrikes into Syria markets turned and bought the safer USD back to the 107.35 weekly close.  Monetary policy head Eiji Maeda suggested the Bank of Japan (BoJ) may raise its interest rate targets before price growth reaches 2%, trade figures as well as yearly CPI Friday should give us clues with the Japanese Yen (JPY) still well supported from the late March low of 104.70.

Canada

The Canadian Dollar (CAD) has traded stronger on the back on stronger oil prices. Crude traded to a high of 67.70 Thursday before succumbing to risk off markets due to the Syrian Missile attacks on Syria. The Canadian Dollar has opened the week against the US Dollar (USD) around 1.2600 from its prior open at 1.2700. At one point the pair traded to a fresh 20th February 2018 low before punters bought back the US Dollar and sold equities, the DOW closing at 24360 after reaching 24650 during the risk squeeze. The bank of Canada (BoC) announce their cash rate this week on Thursday with no hike predicted remaining at 1.25% with the monetary statement to follow, monthly CPI also to publish.

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