Kiwi tests resistance as markets take stock
Wednesday 27 February, 2019
Daily Currency UpdateNZD
The New Zealand dollar enjoyed modest gains through trade on Tuesday, edging marginally higher on a sustained appetite for risk and broader USD softness. The New Zealand dollar stopped just short of breaking through 0.69, touching intraday highs at 0.6898 as investors and markets stabilised, consolidating recent moves and electing to maintain ranges.
Having largely shrugged aside RBNZ moves to increase capital bank requirements the NZD has enjoyed a sustained upside as optimism surrounding US-China trade relations bolsters demand for risk, while the Fed affirmed its commitment to patience and data dependency. Commentary from Jerome Powell was peppered with a dovish lilt as the Fed Chair reiterated that inflation pressure was muted and global pressures were showing signs of weighing on US domestic growth. Powell’s Senate address did little to assuage investors’ fears the Fed will remain on hold through 2019 and possibly cut rates in 2020, forcing a downward correction in the USD and supporting the recent NZD upturn.
Resistance remains intact on moves approaching 0.69/0.6920 as attentions turn to Domestic Trade Balance data and a slew of US indicators for direction through Wednesday.
Key MoversTuesday saw the Aussie rise for the second consecutive day against the greenback. The London session saw AUD/USD gradually ascend to 0.7150 before racing to 0.7190 towards the back end of the New York session as the USD was sold off. AUD/NZD also rose from 1.0390 to 1.0536 on the day.
Today we have the Q4 construction work read due out at 11:30 am Sydney time. The read, which is expected to show a 0.4% rise after a weaker than expected read in Q3 and will be watched closely as an input for GDP forecasts for future quarters. Offshore we have NZ trade balance this morning from across the pond before tonight we have second tier data due out of the US in the form of December factory orders, home sales data and testimony from Fed Chair Powell.
We expect the Aussie to continue to take its cues from global risk appetite and see AUD/USD as being relatively well supported around 0.7150 and 0.7120 handles. Topside moves are expected to catch resistance on approach to 0.7200 before 0.7220.
The Great British Pound surged to fresh highs through trade on Tuesday after Theresa May announced she would offer lawmakers the chance to vote on extending Article 50 and delaying Britain’s exit from the EU. Sterling surged in the wake of the announcement as the chances of the UK crashing out of the European bloc without an exit agreement in place were dramatically reduced. Jumping 1.4% the pound touched five-month highs against the USD while surging to 21-month highs against the Euro, enjoying its largest daily gain against the common currency in almost two years.
The vote to extend Brexit negotiations has been scheduled for March 14th, an emergency backstop should parliament reject May’s current Brexit deal on March 12th. Having moved through 1.3250 headline news will continue to drive direction as the door has been opened for an extension toward a collection of strategically placed options at 1.34 and 1.35.
Attentions remain squarely affixed to Brexit developments with headline news and willingness for British lawmakers to accept the current deal driving short term direction.
The Greenback fell to a three-week low on Tuesday against a basket of currencies as Federal Reserve Chairman Jerome Powell repeated that the U.S. central bank would remain patient on monetary policy, suggesting that it was unlikely to raise interest rates anytime soon.
This Wednesday, the US will release December Trade Balance, January Durable Goods Orders, and Pending Home Sales.
From a technical perspective, the Greenback is slightly weaker against the Australian dollar this morning trading at 0.7184. We continue to expect support to hold on moves approaching 0.7130 while now any upward push will likely meet resistance around 0.7190. The New Zealand dollar also gained against the Greenback up 0.2 percent to 0.6889.
The Euro further advanced against the United States Dollar yesterday to hit a one-week high of 1.1380. Further gains can be attributed to developments in Brexit, as UK PM Theresa May has advised that a vote would be done to extend the Brexit leave date of March 29th to no later than June 30th, to avoid having the UK participate in European parliamentary elections. German Consumer Climate also came back on target with its forecast yesterday, at 10.8.
Two data releases expected to have an impact on the EUR will be out this evening. These will show the change in private loans issued to consumers and the average yield on Italian 10-year bonds sold at auction. Deutsche Bundesbank President Weidmann will also hold a press conference about their annual report, and his public engagement is often used to drop subtle clues regarding future monetary policy.
The Canadian dollar is slightly lower this morning when valued against the Greenback falling below the 1.3200 level amid weaker oil prices. Crude oil prices added to the overnight slump, triggered by the US President Donald Trump's comments, was seen as one of the key factors weighing on the commodity-linked currency.
On the release front today in Canada all eye will be on quarterly Consumer Price Index (CPI) which is expected to see the annual figure come down to 1.6% from 2.0% in December.
From a technical perspective, the Canadian dollar this morning is trading at 1.3167. We continue to expect support to hold on moves approaching 1.3150 while now any upward push will likely meet resistance around 1.3240.
- NZD/AUD: 0.9550 - 0.9690 ▼
- GBP/NZD: 1.8980 - 1.9550 ▲
- NZD/USD: 0.6770 - 0.6920 ▲
- NZD/EUR: 0.5980 - 0.6120 ▼
- NZD/CAD: 0.8980 - 0.9130 ▼