The US Mid-Term Elections did not have the impact, many thought they would, on markets. Big wins from the Democrats, in both the House and the Senate, did little to unsettle markets. The gridlock now expected, with the Republicans holding the Presidency, is usually welcomed by markets. The fear, especially in equity markets, is the threat to AI. Democrats have threatened the expansion of ‘datacentres’, which in turn threatens AI and chips/tech sectors. This was enough to send tech shares tumbling and flight to the safety of the US Dollar, adding further downward pressure to commodity currencies. This, in combination with recent Central Bank decisions from both the RBA and RBNZ, has negatively impacted the respective currencies. Add election uncertainty into the mix and we can expect some coming volatility. It appears the NZ electorate has returned the incumbent Government, allowing for confidence return to local markets and put some backbone back into the currency.
The NZD has suffered downward pressure since the RBNZ refused to raise rates, in line with market expectations, due to heated inflation. The RBNZ resisted the urge to raise rates, especially ahead of an important national election, last Saturday (7th November). The NZD was trading around 0.5700, prior to the RBNZ decision and has since tumbled to 0.5550. The election looks to have returned the incumbent coalition Government, with a reduced margin, but special votes are yet to be counted. The return of the political status quo has enabled the KIWI to regain above 0.5600.
Current Level: 0.5625
Support: 0.5540
Resistance: 0.5700
Last week's range: 0.5527- 0.5657
Prices in the New Zealand (NZD), Australian Dollar (AUD) cross sit just above 0.8000 (1.2500) as we head into Tuesday trading. The cross has been more volatile than penguin at a heatwave pool party of late with a widening divergence between the two central banks taking a toll on the kiwi. Markets are expecting the RBA to hike interest rates later today from 4.60% to 4.85% widening the investor attractiveness of holding AUD. Markets tend to track short- dated interest rates leading to a stronger AUD in this cycle especially after the RBNZ held at 2.75% last week.
Current Level: 0.8025 (1.2455)
Support: 0.7975 (1.2300)
Resistance: 0.8130 (1.2540)
Last week's range: 0.7935- 0.8116 (1.2321- 1.2601)
The NZD/GBP cross-rate has crashed from 0.4275, prior to the RBNZ rate decision, all the way down to 0.4140. This is mainly due to the weakness in the KIWI, but the GBP has gained some ground, as economic data has not been as weak as expected. Geo-Politics and economic data, from the UK, will play a big role in the performance of the GBP. The NZD could be volatile until the final election results are made available. The return of the incumbent Government has allowed the cross-rate to rebound to 0.4180.
Current Level: 0.4186 (2.3889)
Support: 0.4150 (2.3660)
Resistance: 0.4225 (2.4100)
Last week's range: 0.4136- 0.4204 (2.3782- 2.4177)
The weakness in the NZD has hammered the NZD/EUR cross rate, falling from 0.5030 to 0.4960. The inaction of the RBNZ has offered plenty of downside to the currency and this applies to all the cross-rates. The NZ election uncertainty appears to have had a small impact on the currency and the cross-rate, unlike the US Mid-Term Elections. The apparent victory of centre-right to NZ Government has allowed the cross-rate to regain 0.5015.
Current Level: 0.5014 (1.9944)
Support: 0.4975 (1.9800)
Resistance: 0.5050 (2.0100)
Last week's range: 0.4957- 0.5046 (1.9816- 2.0170)
The AUD has suffered a severe beating over the last week, due to the RBA commentary. The RBA recognised inflationary pressures in the economy, raising rates to 4.85%, but the accompanying commentary, was extremely dovish. The RBA are reluctant to raise rates again, in the near term, due to the negative impact on the economy. This sent the AUD tumbling, from above 0.7020, to as low as 0.6870. These are volatile times but the AUD does seem oversold. This improved risk sentiment in international markets has allowed the AUD to recover 0.6900.
Current Level: 0.6922
Support: 0.6850
Resistance: 0.7240
Last week's range: 0.6853- 0.7033
The inherent weakness of the AUD has sent the cross-rate with the GBP sharply lower, from over 0.5220, to 0.5120. The AUD has fallen out of bed and has changed cross rate trading ranges. The AUD does appear to have been oversold, so we may see some recovery, in the short-term.
Current Level: 0.5153 (1.9406)
Support: 0.5075 (1.9280)
Resistance: 0.5185 (1.9700)
Last week's range: 0.5121- 0.5254 (1.9032- 1.9527)
The weakness in the Australian currency has flowed through to the cross rates, with the AUD/EUR tumbling from 0.6250, all the way down to 0.6150. The AUD has been dramatically impacted by the RBA dovish sentiment and this has weighed heavily on the cross rate. The US Mid-Term Elections, sent the safety flows back to the US Dollar, but ‘the rising tide lifts all boats’.
Current Level: 0.6170 (1.6207)
Support: 0.6135 (1.5860)
Resistance: 0.6305 (1.6300)
Last week's range: 0.6140- 0.6305 (1.5858- 1.6286)
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