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The Australian Dollar (AUD) reversed off 1.9140 areas Monday back to 1.8990 against the British Pound (GBP), UK data undermining the Pound. Although Retail Sales Friday turned in a positive result at 0.7% vs 0.2% for June Manufacturing PMI has undone any momentum the GBP had. Figures show a considerable slowing of business and manufacturing output, the worst in 6 months. We see odds of a hike from the Bank of England (BoE) of 50 points now slim in the aftermath of this cooler data with calls for just 25 points to 5.25% on August 3rd. A light data docket in the cross should see the GBP weaken further confirmed by higher highs and higher lows on the chart.

Current Level: 0.5251 (1.9043)
Resistance: 0.5405 (1.9340)
Support: 0.5170 (1.8500)
Last Weeks Range: 0.5189-0.5305 (1.8849-1.9271)

The Australian Dollar (AUD) closed the week around 0.6255 against the US Dollar (USD) declining more than 1% on the week. Prices into Tuesday are bouncing around open levels as we await key data this week. Australian CPI was predicted to cool fast over the year with Wednesday’s release expected to confirm this with a much anticipated 5.5% print from 7.0% y/y for June. If we see this number we can expect the RBA will be relieved and take onboard a more relaxed policy approach, however one can never rule out further hikes. The Federal Reserve policy and cash rate release is Thursday Morning with a hike most likely of 25 points expected taking the cash rate to 5.50%. Powell’s objective is to soften the US economy enough to not send it into a recession. The question remains- how much inflation can he tolerate to not hike Thursday and over the remainder of 2023. We predict an improvement in price with a possible retest of the 0.6800 zone.

Current Level: 0.6731
Resistance: 0.6700
Support: 0.6600
Last Weeks Range: 0.6721-0.6847

Price in the Euro (EUR), New Zealand Dollar (NZD) cleared solid support Monday at 0.5555 (1.8000) to reach a fresh low of 0.5535 (1.8070) matching an August 2020 level. An underperforming EUR post a slew of eurozone manufacturing and services industry reads sent the Aussie higher retracing a chunk of last week’s declines. Manufacturing in the region looks asleep at the wheel, the worst result in months. Indicators point to slowing weakness in the second and third quarters. All eyes will be on the ECB cash rate release Thursday night NZT with an expected hike of 25 points to 4.25% with rhetoric suggesting a halt to the tightening cycle although a hawkish approach is predicted based on stubbornly high inflation.

Current Level: 0.5595 (1.7873)
Resistance: 0.5700 (1.8050)
Support: 0.5540 (1.7545)
Last Weeks Range: 0.5541-0.5678 (1.7612-1.8047)

The New Zealand Dollar (NZD) reached the outer range low Monday around 0.4790 (2.0880) against the English Pound (GBP) before reversing back to 0.4835 (2.0680) early this morning the kiwi making back some of last week’s losses. UK Retail Sales printed better than expected at 0.7% vs 0.2% forecast for the month of June showing a reflection of “summer sales” in the region. Soft UK Manufacturing has signalled a slowing theme along with Chinese authorities pledging to increase policy supports all supported the kiwi. We don’t have any further data to publish in the pair over the rest of the week suggesting price could continue to bounce around in recent zones.

Current Level: 0.4830 (2.0703)
Resistance: 0.4880 (2.0880)
Support: 0.4790 (2.0490)
Last Weeks Range: 0.4786-0.4880 (2.0492-2.0892)

Price in the New Zealand Dollar (NZD), Australian Dollar (AUD) pair reversed off 0.9160 (1.0920) support Monday on its way to 0.9235 (1.0830). The area around 0.9160 represents 61.8%, major “fib” support from the recent low at 0.9050 (1.1050) and the high at 0.9320 (1.0730) highlighting subsequent moves higher. As I write we are back towards 0.9210 (1.0860) area with further moves predicted towards 0.9260 (1.0800) over the coming hours/days. Aussie CPI q/q ending June should print at 1.1% down from the first quarter result of 1.4% and more importantly the 3y/y figure should drop to around 5.5% from 7.0%. Anything higher than 5.5% may give the RBA cause for concern and increase flow back into the AUD.

Current Level: 0.9196 (1.0864)
Resistance: 0.9320 (1.1043)
Support: 0.9055 (1.0727)
Last Weeks Range: 0.9162-0.9325 (1.0732-1.0914)

The New Zealand Dollar (NZD) has made attempts to regather last week’s losses Monday improving off 0.6155 to 0.6215 this morning against the US Dollar (USD). Equity markets were back in black overnight after extended moves to the downside over the past week kept the kiwi weighed down. We are optimistic we may see a push higher over the week by the kiwi as we watch the key Federal Reserve rate release Thursday. The Federal Reserve will most likely hike just 25 points to 5.5%. Market will be watching for clues as to whether the Fed will halt its tightening policy as analyst’s fear a hard fall to the economy looms.

Current Level: 0.6191
Resistance: 0.6390
Support: 0.6065
Last Weeks Range: 0.6163-0.6366

Market Overview:
Key Points:

• The Bank of Japan is expected to adjust monetary policy this week from their ultra loose stance
• We see a 25% chance the US will fall into recession over the next 12 months.
• NZ Trade Surplus showed a smaller month of June at NZD9M surplus compared to a consensus of NZD235M highlighted by a slowing global economy and the NZ recession weighing on imports.
• Analysts are predicting a hike in July and again in September to the ECB cash rate.
• The Fed is predicted to lift rates by 25 points to 5.50% Thursday at 6am NZT-we expect the normal volatility. Interest will be centred on any clues to if they will raise again or hold policy for some time.
• The ECB is expected to deliver a 25-point rise to its cash rate taking it to 4.25% with the ECB not done yet with rate hikes despite inflation softening recently from 6.1% to 5.5%.
• Latest IMF world growth forecast releases later today with expectations a further slide to growth from 2.9% in January to 2.8% is predicted in 2023.
• The Canadian Dollar (CAD) is the strongest performer over the week with the British Pound (GBP) the worst performer. Read more

Monday July 24
7:15pm EUR French Flash Manufacturing PMI
Forecast 46.1
Previous 46
7:15pm EUR French Flash Services PMI
Forecast 48.5
Previous 48
7:30pm EUR German Flash Manufacturing PMI
Forecast 40.9
Previous 40.6
7:30pm EUR German Flash Services PMI
Forecast 53.2
Previous 54.1
8:30pm GBP Flash Manufacturing PMI
Forecast 46.1
Previous 46.5
8:30pm GBP Flash Services PMI
Forecast 53.1
Previous 53.7

Tuesday July 25
1:45am USD Flash Manufacturing PMI
Forecast 46.1
Previous 46.3
1:45am USD Flash Services PMI
Forecast 54
Previous 54.4

Wednesday July 26
2:00am USD CB Consumer Confidence
Forecast 112.1
Previous 109.7
1:30pm AUD CPI q/q
Forecast 1.00%
Previous 1.40%
1:30pm AUD CPI y/y
Forecast 5.50%
Previous 5.60%
1:30pm AUD Trimmed Mean CPI q/q
Forecast 1.10%
Previous 1.20%

Read more

After posting 0.6890- key resistance, late last week against the US Dollar (USD), the Aussie extended falls to 0.6750 midweek as Chinese data failed to impress. The Chinese Yuan dropped after discouraging “FDI” data showing foreign investment into China slowed. Australian employment figures pushed up the AUD to 0.6850 area post the release, while the unemployment rate remained at a stubborn 3.5%, the participation rate only fell slightly from the May record to 66.8%. This should raise questions over an RBA raising rates at their next meeting. We expect the AUD to push up into the weekly close to retest 0.6800 levels. Next week’s economic docket full with the Federal Reserve monetary policy leading the way with the Fed resuming their rate hikes. We expect a rise from 5.25% to 5.5% and big dollar buying.

The current interbank midrate is: AUDUSD 0.6776
The interbank range this week has been: AUDUSD 0.6749- 0.6845

NZ CPI remains stubbornly high with the release Wednesday showing the June figure at 6.00% down from 6.7% vs 5.9% predicted. Fuel costs have eased while food prices, in particular vegetables, have gained over 23% in the last year. The RBNZ signalled they would be sitting on the 5.5% cash rate for some time, but this recent inflation data may test this. Meanwhile UK inflation dipped to 7.9% year on year in June compared to expectations of 8.2% making the read the biggest decline in two months and the lowest level since March 2022. The British Pound (GBP), New Zealand Dollar (NZD) cross remained in its 5-week range with the GBP recovering gains throughout this morning’s London session off 2.0490 (0.4880) back to 2.0655 (0.4840). UK Retail Sales prints tonight and should reflect the recent easing trend.

The current interbank midrate is: NZDGBP 0.4839 GBPNZD 2.0665
The interbank range this week has been: NZDGBP 0.4786- 0.4879 GBPNZD 2.0492- 2.0891