• US and Iran are on the cusp of a preliminary agreement, a reduction in tensions would be positive for risk currencies such as the NZD and AUD.
• Crude Oil is back up trading above 100.00 per Barrel Monday as investors weigh ongoing conflicts.
• The Reserve Bank of New Zealand (RBNZ) surprised markets by leaving the cash rate unchanged at 2.75% in a 4-3 vote. Tightening policy is still likely but conditional on incoming data. 5 major banks were in favour of a hike to 3.0% with 90% of market makers expecting a hike. Governor Breman said the two hikes already delivered have given the committee time to access effects on inflation.
• Bank of Canada (BoC) hike interest rates from 2.25% to 2.5%- calling it, inflation insurance.
• Federal Reserve (Fed) left interest rates on hold Thursday at 4.0% pausing after 50 points of tightening allowing policymakers to ponder the need for further action.
• The ECB have decided to leave interest rates on hold at 2.65% with members aggreging further tightening is necessary in December.
• The British Pound (GBP) was the strongest main board currency last week while the New Zealand Dollar (NZD) was the worst performer.
The US and Tehran are reportedly close to a peace agreement which may take tensions away from markets and boost “risk” markets. We could see a rally in the New Zealand Dollar (NZD) in the event of reduced geopolitical risk dropping oil and supporting equity markets. The kiwi traded into Tuesday reasonably benign around 0.5620 against the US Dollar (USD) with key support sitting around 0.5600 levels.
Current Level: 0.5615
Support: 0.5580
Resistance: 0.5700
Last week's range: 0.5581- 0.5707
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 New Zealand Dollar (NZD) lost ground last week over the cash rate announcement after the RBNZ surprised markets by holding at 2.75%. Prices surged to 0.4215 (2.3730) to close the week and have extended lower Monday to post 0.4190 (2.3860) this morning marking a September 2015 (post Brexit) low. Later in the week the Bank of England (BoE) should hike interest rates from 3.75% to 4.00% but may push back on rhetoric around raising later. Downside bias remains for the kiwi.
Current Level: 0.4188 (2.3877)
Support: 0.4130 (2.3400)
Resistance: 0.4275 (2.4200)
Last week's range: 0.4200- 0.4281 (2.3354- 2.3812)
Last week’s hold at 2.75% from the Reserve Bank of New Zealand weakened all the kiwi crosses after markets expected a hike to 3.00%. Prices in the New Zealand Dollar (NZD), Euro (EUR) shifted from 0.5110 (1.9570) to this morning’s 0.5020 (1.9915). The Euro is also taking support from Eurozone growth and inflation risks with the ECB saying they could raise rates in December. Geopolitical risks this week could support a slice of “risk on” if Iran and the US can agree on a deal.
Current Level: 0.5015 (1.9940)
Support: 0.4970 (1.9520)
Resistance: 0.5120 (2.0120)
Last week's range: 0.5021- 0.5118 (1.9537- 1.9915)
The Australian Dollar (AUD) has come under modest pressure Monday against the US Dollar (USD) falling to 0.7000 big number support. A disappointing Chinese PMI data read raising concerns about the biggest Australian trading partner. Markets await news regarding an agreement between US and Iran which could boost risk and offer the Aussie a bigger picture uptrend. RBA policy announcement is today with markets widely predicting a rise in the interest rate from 4.60% to 4.85%. Governor Bullock recently telling a senate committee that inflation is likely to run much higher than initial forecasting, already at 4.3%. We expect the 0.7000 number to hold.
Current Level: 0.6995
Support: 0.6900
Resistance: 0.7120
Last week's range: 0.7009- 0.7067
The Australian Dollar (AUD) closed the week against the British Pound (GBP) around 0.5250 (1.9050) before extending moves to 0.5220 (1.9150) Monday. It’s a double week or central bank policy announcements with markets expecting both the RBA and Bank of England (BoE) to hike from 4.60% to 4.85% and 3.75% to 4.0% respectively. The Aussie struggled during NY with disappointing Chinese PMI date printing. The BoE vote is expected to be split on guidance on whether the BoE will need further tightening.
Current Level: 0.5215 (1.9175)
Support: 0.5200 (1.8890)
Resistance: 0.5295 (1.9230)
Last week's range: 0.5232- 0.5303 (1.8856- 1.9110)
The Australian Dollar (AUD) rallied to long term levels at 0.6340 (1.5770) late last week before giving back gains to trade back to 0.6260 (1.5980) in early Tuesday. Growth in the Eurozone and persistent inflation risks are holding buyers in the EUR especially with prospects of a hike on the cards at their December meeting. Today’s RBA hike to 4.85% could turn the tables towards retesting levels around 0.6305 (1.5860)
Current Level: 0.6250 (1.6000)
Support: 0.6170 (1.5800)
Resistance: 0.6330 (1.6200)
Last week's range: 0.6259- 0.6340 (1.5772- 1.5975)
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