The Australian and New Zealand Dollars are inching lower early Wednesday as the currencies continue to struggle with key technical resistance areas on the daily chart. While a weaker U.S. Dollar and strong commodity prices have provided a tailwind, another retreat in global equity markets appears to be capping gains once again.
Technically, the AUD/USD is facing stiff resistance inside a three-month 50% to 61.8% zone at .7769 to .7826. The NZD/USD is facing a similar challenge inside its zone at .7204 to .7266.
Supportive Commodity Prices
Commodity prices remained supportive with Australia’s top export earner iron ore holding atop $200 a tonne on strong demand from Chinese steel makers, and despite efforts by Beijing to talk down prices.
Higher gold prices may have also underpinned the Aussie. Gold scaled a near-four-month peak on Tuesday supported by a weaker U.S. Dollar, while non-yielding bullion also attracted investors seeking an inflation hedge.
In New Zealand, prices for dairy, a major goods export, also held firm in the latest global auction overnight to be up 42% on the same time a year ago.
“It’s an indication of the current strength of the dairy market and the “cheapness” of the NZD against a very strong terms of trade backdrop, not dissimilar to the AUD right now,” said analysts at NAB.
Australian Economic News
Australian data showed annual wage growth ticked a fraction higher to 1.5% in the March quarter, but remained far away from the pace desired by the Reserve Bank of Australia (RBA). Minutes of its May policy meeting released on Tuesday showed the central bank felt wages growth would have to run sustainably above 3% to push inflation back into its 2-3% target band.
In other news, a measure of Australian consumer sentiment fell in May to break a three-month winning streak, a surprising downbeat reaction to the government’s annual budget that had been branded as essential to securing economic recovery.
The Westpac-Melbourne Institute Index of consumer sentiment released on Wednesday fell 4.8%, partly retracing April’s 6.2% jump.
New Zealand Economic News
Producer price outputs in New Zealand were up 1.2 percent on quarter in the first quarter of 2021, Statistics New Zealand said on Wednesday – after rising 0.4 percent in the three months prior.
Producer price inputs climbed 2.1 percent on quarter following the flat reading in the previous three months.
Aussie and Kiwi traders are currently focused on the domestic economy, commodity prices and demand for riskier assets so the release of the minutes from the U.S. Federal Reserve’s most recent meeting due at 18:00 GMT on Wednesday may have little impact on the currencies.
The minutes are expected to confirm that policymakers think a rate hike is still in the distance.
The market moving events could be Thursday’s Australian Employment Change report and the Unemployment rate. New Zealand will release its annual budget.