US Dollar Index spiked to 92.55 showing the wide ranging support for the greenback; NZD bounced off the low of 0.6900 midweek after the RBNZ left the benchmark rate unchanged at 1.75%; AUD continued its bullish run against the weakened NZD

By Neven Fisher*:

With the US pulling from the Iran deal this has put pressure on European countries which still want the deal to stay in place. China, France, Russia, Britain and Germany all have expressed commitment to stay in the deal. Germany in particular has said they would try to persuade the US government to continue with it. On Sunday the US government threatened to bring about new sanctions on these countries who currently do business with Iran. The US are still hopeful that they and their allies could strike up a new deal with Iran. The US national security adviser John Bolton said a possible deal could be made but this depends on the "conduct of the other governments". The withdraw by the US has raised the risk of further conflict in the Middle East with a lack of current stability there. Currency markets had an uneventful close the week, the US Dollar is still the currency of choice, then it’s a distant second to the Canadian Dollar. Crude Oil prices soured based on uneasiness with the Iran situation raising to a high of 71.71 before settling around 70.70 at the weekly close. The US Dollar Index spiked to 92.55 showing the wide ranging support for the greenback. Equities remain strong as well with the DOW index coming off a weekly low of 24200 to close around 24830.  The RBA kept the benchmark rate unchanged at 1.5% extending its record breaking run and the Bank of England (BoE) left their benchmark cash rate unchanged at 0.50% in a 2-7 vote as markets expected, although the market saw the BoE comments as generally dovish after the pricing out a rate hike for 2018. This Thursday we have the NZ Budget, this will set the tone for the NZ Dollar for a while to come. With business sentiment at a low since the Labour government took office Ardern is mindful of this while the budget will aim to change people's perception that the country's economic tender situation is a little more rosy. We can expect to see a homeless package of $100M come in along with a health boost of over 8B over the next 4 years.

Major Announcements last week:

  • RBNZ keeps cash rate on hold at 1.75%
  • Bank of England keeps cash rate on hold at 0.50%
  • President Trump exits from the Iran deal.
  • Canadian employment prints at -1.1K way down on 211K expected
  • Crude Oil hits 71.71 a multiyear high
  • Australian Budget promises tax cuts

NZD/USD

The New Zealand Dollar (NZD) bounced off the low of 0.6900 midweek after the RBNZ left the benchmark rate unchanged at 1.75%, the US Dollar has outperformed across the board. The kiwi bounced back late Friday to 0.6960 where it closed. The US Dollar has continued its rally across the board Tuesday with the market being risk averse. President Trump exiting from the Iran deal has opened up talks on new sanctions with fresh risk of further conflict in the Middle East with a lack of stability there. A quiet week for the kiwi in terms of local data apart from the Annual Budget, a slew of US based releases should create volatility towards the end of the week with building permits and unemployment claims

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.6905 0.6825 0.7000 0.6903 - 0.7031

NZD/AUD (AUD/NZD)

The Australian Dollar continued its bullish run against the weakened New Zealand Dollar (NZD) reaching a level of 0.9190 (1.0880) early Tuesday. Trading at 0.9345 during the RBNZ announcement last Thursday the Aussie put on a further 155 points against the struggling NZD. Support is still at 0.9100 (1.1000) but with a number of economic data publications to print later in the week expecting to show a buoyant Australian economy we see the pair retesting 0.9100 this week. The Global Dairy Auction is overnight with Whole Milk values expected to be positive in line with recent prices.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9175 0.9100 0.9300 0.9174 - 0.9381
AUD / NZD 1.0899 1.0750 1.0989 1.0660 - 1.0900

NZD/GBP (GBP/NZD)

The New Zealand Dollar (NZD) continued to depreciate against the surging British Pound (GBP) regaining earlier lack of support after the Bank of England (BoE) cash rate announcement trading back at 0.5100 (1.9600). Even though the BoE have priced out a hike for 2018 we will expect the pair to make a break for 1.9800 and ultimately 0.5000 (2.0000) over the following weeks based on the weakening kiwi. Tonight’s unemployment figures should give us confirmation of further direction.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5090 0.5063 0.5117 0.5089 - 0.5184
GBP / NZD 1.9646 1.9540 1.9750 1.9291 - 1.9649

 NZD/CAD

As President Trump pulled out of the Iran deal Crude oil prices rallied strong to 71.71 creating a sell off in the New Zealand Dollar (NZD), Canadian Dollar (CAD) pair. Its trading at the low of 0.8845 Tuesday. Eve with equities all posting gains overnight with investors buying risk products this has not been enough to stop the kiwi drifting lower with Oil prices through the roof. Support down at 0.8700 the low of November 2017 is fast approaching but so is the NZ Budget Thursday which may stem the decline if optimism is viewed. Canadian CPI is also later in the week and is expected to be weaker than previous months around the 0.3% mark.

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.8835 0.8670 0.9045 0.8841 - 0.9082

NZD/EURO (EURO/NZD)

The New Zealand Dollar (NZD) has broken through key support of 0.5835 (1.7140) against the Euro (EUR) to register a new low of 0.5790 (1.7270). Adrian Orr released his first monetary statement Thursday and was praised by markets for being specific with his delivery. The pair looks to be heading for a retest of 0.5740 (1.7420) The New Zealand Budget will be released Thursday at 2pm NZ time.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5788 0.5740 0.5900 0.5788 - 0.5896
EUR/NZD 1.7277 1.6960 1.7430 1.6962 - 1.7277

NZD/YEN

The New Zealand Dollar (NZD) continued its decline through 76.10 to a low of 75.75 against the Japanese Yen (JPY) as investors continue to buy JPY in risk off market conditions. NZ Business manufacturing printed up on expectation and gave the kiwi a short reprieve but with Japanese yearly Money Stock printing at 3.3% with 3.2% expected the Japanese Yen rallied across the board. For Japanese buyers we see support around 75.50- watch for a bounce higher to 77.00 for good buying levels.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 75.75 75.50 79.50 75.77 - 76.79

AUD/USD

The Australian Dollar (AUD) rallied from the midweek low of 0.7415 against the US Dollar (USD) to close the week around 0.7540 levels. Chinese economic activity has been encouraging along with a positive Australian Budget and RBA monetary policy statement both helped buyers back into the Aussie to current levels. Economists are expecting wage price index to lift by 0.6% for the first quarter of 2018 which will push annual growth to 2.2% from 2.1% in the last quarter of 2017. We need to see the pair trading above 0.7650 to swing the downward momentum into a rally trend, recent support for the Aussie suggests this is very possible with a retest back to late April levels of 0.7800 possible in the short term.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7525 0.7430 0.7560 0.7414 - 0.7566

AUD/GBP (GBP/AUD) 

The Bank of England left their benchmark cash rate unchanged at 0.50% in a 2-7 vote as markets expected, the market seeing the BoE comments as generally dovish after pricing out a rate hike for 2018 sending the GBP lower to 0.5586 (1.7900) against the Australian Dollar (AUD). The Pound has recovered slightly Tuesday to 1.8000 and should trade back to 0.5400 (1.8500) soon. UK unemployment figures release later today and should be in line with expectation boosting GBP further.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5545 0.5485 0.5582 0.54825 - 0.5584
GBP / AUD 1.8034 1.7912 1.8230 1.7909 - 1.8241

AUD/EURO (EURO/AUD)

The Australian dollar closed the week marginally in positive territory against the Euro (EUR) around 0.6320 (1.5820) at one point trading at a high of 0.6340 (1.5770). A slow start to the week has seen the EUR make up ground to 0.6300 (1.5880) support. The 40-day moving average looks to creating resistance around current levels with the pair expected to trade back to the previous low of 0.6300 (1.5880) if German economic sentiment tonight is below expectation.

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6305 0.6265 0.6340 0.6265 - 0.6338
EUR/AUD 1.5804 1.5780 1.5960 1.5778 - 1.5962

AUD/YEN

The Australian Dollar (AUD) Japanese Yen (JPY) pair continues to show a lack of any real direction. We have seen the Aussie stronger lately since the RBA announcement and Australian Budget however, the pair coming off its five week low of 81.10 travelling to 82.50 would suggest some ongoing momentum towards 84.00 as long as RBA policy meeting minutes are hawkish showing continued growth. Unemployment figures and wage price index will be very important later in the week.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 82.60 81.10 84.00 81.14 - 82.79

AUD/CAD

The Australian Dollar (AUD) pushed higher late last week against the rampant Canadian Dollar (CAD), after dropping to a Dec 17 low it traded back to 0.9630. Crude Oil prices have continued to stay high just off the 71.71 high creating value for investors to buy the CAD however Canadian employment figures were weak having a detrimental effect on CAD momentum. We see lower lows forming in the pair, buyers should look to current levels as we see further falls to 0.9550 possible.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 0.9630 0.9560 0.9700 0.9558 - 0.9707

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Market commentary:

With the US pulling from the Iran deal this has put pressure on European countries which still want the deal to stay in place. China, France, Russia, Britain and Germany all have expressed commitment to stay in the deal. Germany in particular has said they would try to persuade the US government to continue with it. On Sunday the US government threatened to bring about new sanctions on these countries who currently do business with Iran. The US are still hopeful that they and their allies could strike up a new deal with Iran. The US national security adviser John Bolton said a possible deal could be made but this depends on the "conduct of the other governments". The withdraw by the US has raised the risk of further conflict in the Middle East with a lack of current stability there. Currency markets had an uneventful close the week, the US Dollar is still the currency of choice, then it’s a distant second to the Canadian Dollar. Crude Oil prices soured based on uneasiness with the Iran situation raising to a high of 71.71 before settling around 70.70 at the weekly close. The US Dollar Index spiked to 92.55 showing the wide ranging support for the greenback. Equities remain strong as well with the DOW index coming off a weekly low of 24200 to close around 24830.  The RBA kept the benchmark rate unchanged at 1.5% extending its record breaking run and the Bank of England (BoE) left their benchmark cash rate unchanged at 0.50% in a 2-7 vote as markets expected, although the market saw the BoE comments as generally dovish after the pricing out a rate hike for 2018. This Thursday we have the NZ Budget, this will set the tone for the NZ Dollar for a while to come. With business sentiment at a low since the Labour government took office Ardern is mindful of this while the budget will aim to change people's perception that the country's economic tender situation is a little more rosy. We can expect to see a homeless package of $100M come in along with a health boost of over 8B over the next 4 years.

Australia

A quiet week for the Australian economy saw little news of note- The Australian budget the only significant highlight saw no surprises supporting fresh tax cuts. In summary: The Australian economy is in its 27th year of consecutive growth, business conditions are at the highest levels since the global financial crisis of 2008 and global growth is at its fastest pace in six years. Monetary policy minutes releases tomorrow and should support recent positive economic data followed by unemployment figures Thursday.

New Zealand

The New Zealand Dollar weakened following last week’s RBNZ announcement and continued to underperform. The benchmark rate of 1.75% was left in place as was widely expected with Adrian Orr downgrading the forecasted cash rate for June 2019 down from 1.9% to 1.8%. This week’s first labour Annual Budget will be in focus and offer plenty of opinions and discussions based on the results to what has been omitted or under funded by the NZ government. David Clark, the current health minister, has said he estimates it would cost over 14B over the following 10 years to get health assets to the standard they should be. The NZD has opened at 0.6960 against the US Dollar (USD) with expectations it should remain relatively steady this week across the board. A retest of 0.7000 is on the cards if the market risk returns.

United States

Now that the US government has pulled out of the Iran deal President Trump wants to impose sanctions on European Countries which run business with Iran bringing about a fair amount of head scratching. With France, Germany, China, Russia and Britain staying in the current agreement the US are looking for a deal which addresses all accounts of Iran destabilising its activity in the Middle East. Theses sanctions block all American businesses from doing business in Iran and all foreign businesses doing business in Iran using the US Banking and financial system. The US Dollar has remained the strongest currency from the G10 group with geopolitical tensions in place. This week on the calendar we have US monthly retail sales, building permits and Crude oil inventories. We suspect the US Dollar may remain in favour through the week with a lack of ongoing risk appetite.

Europe

The Euro (EUR) recovered from its early week decline pushing back over 1.1900 Friday against the US Dollar making it one of the best performing currencies closing the week.
ECB policy maker Francois Villeroy de Galhau said the ECB could give new guidance on the timing of its first rate hike as the end of its massive bond buying program approaches. Investors are focused this week on speeches by a number of ECB officials and German data which is expected to show a slowing of economic conditions. Yearly CPI is released Wednesday around an expected 1.2% growth which is down on previous months.

United Kingdom

The British Pound struggled towards the end of the week after the Bank of England (BoE) left rates unchanged in its cash rate release. With two of the 7 votes were in favour of hiking, markets interpreting the overall tone as more dovish than anticipated with markets now pricing out a 2018 hike. Against the US Dollar the pair has bounced off a fresh low of 1.3455 the December 28th low to trade back at the top of the current range at 1.3560. This week’s inflation hearing could put pressure on the GBP limiting the upside. Also, UK average earnings is scheduled for Tuesday and needs to be around the expected 2.8% for the GBP to push higher.

Japan

The Japanese Yen consolidated around the 108.50 area after Bank of Japan (BoJ) Kuroda made further comment that he sees sustained momentum in achieving the Bank of Japan's 2.0% goal. Too much emphasis on medium term economic forecasts should not be given too much weight as companies raise wages and prices of goods and services. The Japanese Current Account rose to JPY1190B above the JPY1023B expected and well above the February result of 188B. Japan’s overall government surplus stands at a hefty JPY3122B which is well above predictions. Quarterly prelim GDP is released Wednesday for March and is expected to be better than the previous few months figures. We expect the JPY to make a push for 108.50 this week if risk prevails in the market.

Canada

The Canadian Dollar was the second best performing currency last week with Crude oil prices showing new highs. In the wake of the US pulling from the Iranian deal we have seen oil jump to 71.71 boosting the Canadian Dollar (CAD). Economists are expecting higher prices with the demand outpacing supply for the rest of the year. Global stocks are down to a five year average and falling but most fundamental information we are seeing suggests a bullish market ahead. The Canadian Dollar gave back gains towards the end of the week after disappointing employment figures missed the mark publishing at -1.1K shedding jobs against expectations of 17.8K jobs added to the workforce. The unemployment rate stayed the same at 5.8% the pair bouncing back to 1.2780 late NY session.

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Source: CoinDesk

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