AUD/USD and NZD/USD Fundamental Daily Forecast – Tight Australian Job Market Supports Rate Hike Expectations

The Australian and New Zealand Dollars are edging higher on Thursday on improving risk sentiment amid signs of an easing in Shanghai’s COVID lockdown, although investors remain nervous about the state of the global economy.

The Aussie is receiving additional support from a down tick in Australian unemployment to its lowest level in nearly 50 years. The Kiwi is mostly responding to the slight turnaround in sentiment.

At 06:45 GMT, the AUD/USD is trading .6976, up 0.0025 or +0.36%. The NZD/USD is at .6321, up 0.0026 or +0.42%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.97, down $0.52 or -0.74%.

Shanghai Eases COVID Restrictions in Some Areas

The COVID-19-hit financial hub of Shanghai will start to allow more businesses in zero-COVID areas to resume normal operations from the beginning of June, a deputy mayor said on Thursday as the city looks forward to the end of lockdown.

Shanghai, fighting China’s biggest ever coronavirus outbreak, has been steadily allowing more businesses to reopen and letting larger numbers of residents leave their homes for the first time in nearly seven weeks.

The city was “striving to achieve a full resumption of work and production as soon as possible”, deputy mayor Zhang Wei told a media briefing.

Dip in Australian Unemployment Rate Supports Rate Hikes

Figures from the Australian Bureau of Statistics (ABS) on Thursday showed Australia’s unemployment rate stood at its lowest level in almost 50 years in April as companies took on more full-time workers. This tightening in the labor market will increase pressure on the Reserve Bank of Australia (RBA) to raise interest rates.

According to the ABS, the Australian jobless rate held at 3.9% in April, from a downwardly revised 3.9% in March, matching market forecasts.

Employment missed the forecast with a rise of just 4,000, though that reflected a large 92,400 gain in full-time jobs being offset by an 88,400 drop in part-time work.

New Zealand First Quarter Producer Price Index Rises

New Zealand producer prices rose in the first quarter. Data from Statistics New Zealand showed on Thursday input prices up 3.6 percent and output prices up 2.6 percent.

Last week, the Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations showed business managers forecast annual inflation at 4.88% over the coming year, from 4.4% in the previous survey.

Daily Forecast

The tightening of the Australian job market strongly suggests the RBA will lift interest rates again in June as it scrambles to contain a flare up of inflation to a 20-year high. Trader odds point toward a move to 0.60% at the June policy meeting.

Meanwhile, the RBNZ is widely expected to increase interest rates by half a percentage point at each of its next three policy meetings to get on top of surging inflation, according to Westpac Banking Corp.

The rate hikes combined with Shanghai’s easing of COVID restrictions seems to be enough to underpin the AUD/USD and NZD/USD on Thursday. However, gains are likely to be capped over the near-term because the Federal Reserve is expected to raise rates at a more aggressive pace.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Could Weaken Under .6298, Strengthen Over .6393

The New Zealand Dollar is edging lower early Wednesday after posting three days of gains, primarily on short-covering. Traders are likely reacting to Australia’s disappointing wage growth report, which came in weak enough to suggest its central bank may have to pull back the reins on a series of aggressive interest rate hikes.

At 08:41 GMT, the NZD/USD is trading .6348, down 0.0013 or -0.20%.

Some light position-squaring ahead of the May 25 Reserve Bank of New Zealand could also be taking place. According to ANZ, the Reserve Bank of New Zealand (RBNZ) is expected to raise its Official Cash Rate (OCR) 50-basis points to 2.00%.

Beyond that, ANZ says the path is murkier. However, they think the RBNZ will switch to the more usual pace of 25bp hikes from July onward as evidence mounts that demand is cooling. However, if any more upside surprises to inflation emerge, the hurdle for another 50-pointer in July is low.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6217 will signal a resumption of the downtrend. A move through .6569 change the main trend to up.

The minor trend is also down. A trade through .6380 will change the minor trend to up. This will shift the momentum.

The minor range is .6380 to .6217. Its pivot at .6298 is support.

The nearest resistance is a short-term 50% level at .6393. This is followed by a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to .6298 will determine the direction of the NZD/USD on Wednesday.

Bullish Scenario

A sustained move over .6299 will indicate the presence of buyers. If this move creates enough upside momentum then look for an intraday surge into .6380, followed by .6393.

Bearish Scenario

A sustained move under .6298 will signal the presence of sellers. If this generates enough selling pressure then look for the move to possibly extend into the long-term Fibonacci level at .6231, followed by the main bottom at .6217.

The main bottom at .6217 is a potential trigger point for an acceleration to the downside. The daily chart indicates there is plenty of room to the downside with .5921 the next major target.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Trade Through .6380 Shifts Momentum to Upside

The New Zealand Dollar is edging higher on Tuesday, basically tracking its Australian counterpart which is climbing on the back of somewhat hawkish Reserve Bank of Australia (RBA) meeting minutes. Technical traders are also responding to oversold conditions that are encouraging weak shorts to trim some of their positions.

At 09:45 GMT, the NZD/USD is trading .6360, up 0.0049 or +0.78%.

While still early in the process, the NZD/USD could be building a support base after testing a major long-term retracement zone at .6231 – .5921 last week. Besides central bank activity, traders are also responding to expectations that China may be ending its lockdowns soon.

US Retail Sales Could Fuel Volatility

Today U.S. retail sales report, due to be release at 12:30 GMT, is expected to show that retail sales increased by 1.0% during April and core retail sales rose by 0.4%. The report will reveal information on how consumers are spending in the wake of inflation hovering near a 40-year high.

A strong report will justify the aggressive tone from the Fed. Treasury yields are likely to rise on the news, which would likely pressure the NZD/USD.

A weak report could be an early sign of economic weakness. Although it probably won’t derail the Fed’s plans for 50-basis point hikes in June and July, it could put a cap on future rate hike expectations. This may weaken the NZD/USD, but more than likely put a lid on any major price advances from current levels.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6217 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

The minor trend is also down. A trade through .6380 will change the minor trend to up. This will shift momentum to the upside.

The minor range is .6380 to .6217. Its 50% level at .6298 is support.

On the upside, the short-term resistance is a pivot at .6393. This is followed by a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to .6298 is likely to determine the direction of the NZD/USD on Monday.

Bullish Scenario

A sustained move over .6298 will indicate the presence of buyers. Taking out .6380 will change the minor trend to up and could create the momentum needed to overcome .6393. This could trigger a surge into .6467.

Bearish Scenario

A sustained move under .6298 will signal the presence of sellers. This could trigger a break into the long-term Fibonacci level at .6231, followed by the main bottom at .6217. This is a potential trigger point for an acceleration to the downside with the May 15, 2020 main bottom at .5921 the next major target price.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Strengthens Over .6299, Weakens Under .6217

The New Zealand Dollar closed higher on Friday but still posted its seventh consecutive weekly loss as investors moved back into higher-risk assets. U.S. stocks rose as the markets looked to avoid falling into bear territory following heavy selling in recent days.

The price action largely reflected a shift out of the safe-haven U.S. Dollar, encouraging some short New Zealand Dollar traders to cover.

On Friday, the NZD/USD settled at .6290, up 0.0056 or +0.90%.

In economic news, the New Zealand April Manufacturing PMI hit its lowest level since August 2021.

After the release of the report, BusinessNZ’s Catherine Beard said that after steady expansionary results over recent months, the April result highlighted the fickle nature of what manufacturers are currently experiencing.

BNZ Senior Economist Craig Ebert added, “Supply problems certainly featured extensively in respondents’ comments, including inferences that COVID, and related absenteeism, remains a big issue, even with recorded case numbers having peaked back in March. This provides valuable context to the negativity in the PMI’s jobs index.”

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6217 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

The minor trend is also down. A trade through .6380 will change the minor trend to up. This will also shift momentum to the upside.

The first minor range is .6380 to .6217. Its pivot at .6299 is the first upside target. The second minor range is .6569 to .6217. Its pivot at .6393 is additional resistance.

The major resistance is a long-term 50% level at .6467. The major support is a long-term Fibonacci level at .6231.

Daily Swing Chart Technical Forecast

Trader reaction to .6299 early Monday is likely to determine the direction of the NZD/USD.

Bullish Scenario

A sustained move over .6299 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for a surge into a resistance cluster at .6380 – .6393.

Taking out .6393 will indicate the short-covering is getting stronger. This could trigger a surge into the long-term 50% level at .6467.

Bearish Scenario

A sustained move under .6298 will signal the presence of sellers. This could trigger a sharp break into the long-term Fibonacci level at .6231. This is followed by last week’s multi-year low at .6217.

The low at .6217 is very important. It is the last potential support before the next major target, the May 15, 2020 main bottom at .5921.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Central Banks Back in Focus Amidst Recession Fears

On the Macro

It is a busy week ahead on the economic calendar, with stats 59 due out through the week ending May 20. In the week prior, 45 stats were in focus.

For the Dollar:

It is a relatively busy week ahead.

On Tuesday, retail sales will be the area of focus ahead of jobless claims and Philly Fed manufacturing numbers on Thursday.

While the numbers will influence, Fed Chair Powell and FOMC member chatter will be the key in the week. The markets will be looking for Fed Chair Powell to back up comments from Friday and for members to align with his assurances.

On Friday, the Fed Chair assured the markets that larger rate hikes were off the table.

In the week ending May 13, 2022, the Dollar Spot Index rose by 0.87% to end the week at 104.563. In the week prior, the Index rose by 0.68% to 103.660.

For the EUR:

It is a quiet week ahead.

Eurozone trade and GDP numbers are due out ahead of finalized inflation figures on Wednesday.

Expect any revisions from the first estimate GDP and any upward revisions to prelim inflation figures to draw interest.

On Friday, flash consumer confidence figures for the Eurozone will wrap things up.

From the EU, the Economic Forecasts are due out on Monday and will likely have a greater impact than the numbers, however.

On the monetary policy front, ECB President Lagarde is due to speak on Tuesday, with the policy meeting minutes due out on Thursday.

For the week, the EUR slid by 1.32% to $1.0412. In the previous week, the EUR rose by 0.06% to $1.0551.

For the Pound:

It is a busy week ahead.

On Tuesday, claimant counts and the UK unemployment rate will draw interest ahead of inflation figures on Wednesday.

On Friday, retail sales numbers wrap things up. The stats will give the markets an idea of the impact of inflation on spending and whether the Bank of England needs to take a more hawkish stance to curb inflation.

From the BoE, the monetary policy report hearings will influence on Monday.

In the week, the Pound fell by 0.70% to end the week at $1.2262. The Pound tumbled by 1.79% to $1.2348 in the week prior.

For the Loonie:

Inflation will be the area of focus. On Wednesday, April’s figures are due out and will provide the Loonie with direction.

Other stats in the week include wholesale sales and RMPI numbers that will have less impact.

From the Asia Pacific

For the Aussie Dollar:

Wage growth will be in the spotlight on Wednesday ahead of employment numbers on Thursday.

While wage growth is an RBA consideration, employment figures will need to be positive to support a more hawkish RBA.

From the RBA, the meeting minutes are due out on Tuesday and will provide direction.

In the week, the Aussie Dollar slid by 1.92% to $0.6940.

For the Kiwi Dollar:

Wholesale inflation figures for the first quarter are out ahead of trade data on Friday.

With little else to consider, both sets of numbers will influence. However, China and sentiment towards the global economic outlook will remain the key drivers.

The Kiwi Dollar tumbled by 2.09% to end the week at $0.6276.

For the Japanese Yen:

First quarter GDP numbers will draw plenty of interest on Wednesday ahead of trade data on Thursday.

The Bank of Japan painted a grim picture at the last policy meeting, highlighting downside risks stemming from China and the war in Ukraine.

This week’s stats will give a sense of how bad it could be.

At the end of the week, April inflation figures are also due out. Barring a spike, however, we don’t expect too much influence on the Yen.

The Japanese Yen rose by 1.03% to end the week at ¥129.22 against the dollar. In the week prior, the Yen ended the week down by 0.66% to ¥130.56.

Out of China

Fixed asset investments, industrial production, and retail sales figures are out on Monday.

Expect plenty of interest in the numbers as the markets look to assess the impact of lockdown measures on economic activity.

While the government has promised support, we can expect market sensitivity to the numbers.

On the policy front, the PBoC will set loan prime rates on Friday, with any cuts to support riskier assets. Forecasts are for the PBoC to leave the LPRs unchanged.

Away from the economic calendar, COVID-19 news updates and chatter from Beijing will also influence.

In the week ending May 13, the Chinese Yuan slid by 1.84% to CNY6.7893. The Yuan declined by 0.88% to CNY6.6667 in the week prior.

Geo-Politics

Russia and Ukraine will remain the area of focus in the week ahead.

The Weekly Wrap – Fed Chair Powell Delivered Friday Comfort

The Stats

It was a quiet week on the economic calendar for the week ending May 13, 2022.

A total of 45 stats were monitored, following 62 stats in the week prior.

Of the 45 stats, 20 beat forecasts, with 22 economic indicators falling short of forecast. Three stats were in line with forecasts.

Looking at the numbers, 13 of the stats reflected an upward trend. Of the remaining 32 stats, 30 stats were weaker.

Out of the US

Inflation was back in focus, which caused market turbulence mid-week.

In April, the annual rate of inflation softened from 8.5% to 8.3% versus a forecasted 8.1%. The core annual rate of inflation softened from 6.5% to 6.2%. While softer, inflation was stronger than anticipated, supporting the more hawkish sentiment towards Fed monetary policy.

On Thursday, wholesale inflation also drew attention. In the month of April, the core producer price index increased by 0.4% after a 1.2% rise in March.

Initial jobless claims had a muted impact despite a rise from 202k to 203k in the week ending May-06.

On the monetary policy front, Fed Chair Powell calmed the markets on Friday, assuring that larger rate hikes remained off the table.

In the week ending May 13, 2022, the Dollar Spot Index rose by 0.87% to end the week at 104.563. In the week prior, the Index rose by 0.68% to 103.660.

Out of the UK

GDP and production figures were the main areas of focus in the week.

The stats were Pound negative, with the UK economy contracting in March and production hitting reverse.

In the first quarter, the UK economy grew by 0.8% quarter-on-quarter versus a forecasted 1.00%. The economy expanded by 1.3% in the previous quarter.

Year-on-year, the economy grew by 8.7% versus a forecasted 9.0%. The economy expanded by 6.6% in the fourth quarter of last year. More significantly, the economy contracted by 0.1% in March, after no growth in February.

Production figures also provided little comfort.

 

Production fell by 0.2%, partially offset by construction (+1.7%), with manufacturing production declining by 0.2%.

In the week, the Pound fell by 0.70% to end the week at $1.2262. The Pound tumbled by 1.79% to $1.2348 in the week prior.

The FTSE100 ended the week up 0.41%, partially reversing a 2.08% loss from the previous week.

Out of the Eurozone

ZEW Economic Sentiment figures for Germany and the Eurozone and Eurozone industrial production figures were the key stats.

In May, economic sentiment improved, with Germany’s ZEW Economic Sentiment Index up from -41.0 to -34.3. The Eurozone’s ZEW Economic Sentiment Index climbed from -43.0 to -29.5.

At the end of the week, industrial production disappointed, however.

In March, industrial production fell by 1.8% to test EUR support. Production rose by a modest 0.5% in February.

For the week, the EUR slid by 1.32% to $1.0412. In the previous week, the EUR rose by 0.06% to $1.0551.

The DAX rallied by 2.59%, with the EuroStoxx600 and the CAC40 seeing gains of 0.83% and 1.67%, respectively.

 

For the Loonie

It was a quiet week on the economic data front, leaving the Loonie in the hands of market risk sentiment.

In the week ending May 13, the Loonie fell by 0.42 to C$1.2929 against the greenback. The Loonie slipped by 0.21% to C$1.2875 in the week prior.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar slid by 1.92% to $0.6940, with the Kiwi Dollar tumbling by 2.09% to end the week at $0.6276.

For the Aussie Dollar

Business and consumer confidence numbers disappointed.

In April, the NAB Business Confidence Index fell from 16 to 10. The Westpac Consumer Sentiment Index fell by 5.6% in May, following a 0.90% decline in April.

For the Kiwi Dollar

Electronic card retail sales reversed a 1.3% decline with a 7.0% jump in April. The Business PMI disappointed, however, falling from 53.8 to 51.2.

For the Japanese Yen

Service sector PMI and household spending drew market interest in a quiet week on the data front.

In April, Japan’s services PMI rose from 49.4 to 50.7, up from a prelim 50.5. Service sector activity picked up in response to the government removing remaining COVID-19 restrictions.

Household spending figures disappointed, however. In March, spending slid by 4.1%, following a 2.8% decline in February.

The Japanese Yen rose by 1.03% to end the week at ¥129.22 against the dollar. In the week prior, the Yen ended the week down by 0.66% to ¥130.56.

Out of China

Trade and inflation tested investor appetite for riskier assets.

In April, exports increased by 3.9%, year-on-year, versus a forecasted 3.2% rise. Exports were up 14.7% in March.

The US dollar trade surplus widened from $47.38bn to $51.12bn as imports stalled.

Inflationary pressures picked up in April, with the annual rate of inflation accelerating from 1.5% to 2.1%.

In the week ending May 13, the Chinese Yuan slid by 1.84% to CNY6.7893. The Yuan declined by 0.88% to CNY6.6667 in the week prior.

The Hang Seng Index ended the week down 0.52%, while the CSI300 rose by 2.04%.

NZD/USD Forex Technical Analysis – Teetering on Collapse into May 2020 Bottom at .5921

The New Zealand Dollar is inching higher against the U.S. Dollar early Friday but remains in a position to notch another week of heavy losses, as growth forecasts for China were downgraded and the Yuan extended its decline.

The Kiwi is down about 2.4% for the week and the daily chart doesn’t show any major support until the May 15, 2020 main bottom at .5921.

At 04:55 GMT, the NZD/USD is trading .6255, up 0.0022 or +0.35%.

Concerns that central bank actions to counter high inflation would crimp global growth and the on-going COVID-driven lockdowns in China have been pressuring investors this week to shed higher-risk, higher-yielding currencies.

JPMorgan this week slashed its China growth forecasts and now sees GDP contracting by an annualized 1.5% in the current quarter. It warned data on retail sales and industrial production due on Monday would show hefty falls.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6217 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

The minor trend is also down. A trade through .6380 will change the minor trend to up. This will shift momentum to the upside.

On the downside, the major support is a long-term Fibonacci level at .6231.

On the upside, the nearest resistance is a pair of minor pivots at .6299 and .6393.

The major resistance is a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Friday is likely to be determined by trader reaction to .6231.

Bearish Scenario

A sustained move under .6231 will indicate the presence of sellers. Taking out .6217 will indicate the selling pressure is getting stronger.

The daily chart indicates there is no major support until the May 15, 2020 main bottom at .5921. Therefore, traders should prepare for an acceleration to the downside, or a slow-grind into this level.

Bullish Scenario

A sustained move over .6232 will signal the presence of counter-trend buyers. The first upside target is .6299. Taking out this level could trigger a surge into the minor top at .6380, followed by a pivot at .6393.

Although a move through .6380 will shift momentum to the upside, we expect new sellers to enter on a test of the major 50% level at .6467.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Testing Long-Term Fibonacci Level at .6231

The New Zealand Dollar touched a fresh two-year low on Thursday as worries about China’s slowing economy weighted on Asian stocks, while a survey on New Zealand inflation expectations was more restrained than rate hawks wagered on.

Wednesday’s U.S. Consumer Price Index (CPI) data did nothing to change the bearish tone either. Although the report showed the pace of inflation had slowed, it probably isn’t enough to prevent the U.S. Federal Reserve from raising its benchmark rate at least 50-basis-points in June and July. This is a much faster pace than the Reserve Bank of New Zealand (RBNZ).

At 06:44 GMT, the NZD/USD is trading .6257, down 0.0037 or -0.59%.

RBNZ Longer-Term Inflation Expectations Stabilize, Lowering Rate Hike Expectations

Sellers returned to the NZD/USD on Thursday, followed the release of a RBNZ survey showing longer-term inflation expectations had stabilized after four quarters of sharp increases.

According to the RBNZ survey, the outlook for two years ahead steadied at 3.29% and the five-year outlook edged up only slightly to 2.42%, which central bank policymakers said was close to or in line with its 1-3% target range.

Prior to the release of the report, traders were pricing in larger rate hikes and domestic interest rates were holding near their highest level since 2015.

After the release of the survey, investors quickly trimmed wagers on a half-point rate hike from the RBNZ at its May 25 policy meeting – though it is still seen as more likely than not. The news also fueled a sharp drop in two-year swap rates to 3.63%, from a recent seven-year peak of 3.98%.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6237 will signal a resumption of the downtrend. A trade through .6569 will change the main trend to up.

The minor range is also down. A trade through .6380 will change the minor trend to up. This will shift momentum to the upside.

The long-term trading range is .5469 to .7465. The NZD/USD is currently trading inside its retracement zone at .6467 to .6231. This zone has to hold as support or the Forex pair could collapse.

The first minor range is .6380 to .6237. Its pivot at .6309 is the nearest resistance. The second minor range is .6569 to .6237. Its 50% level at .6403 is another potential resistance area. This followed by the long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Thursday is likely to be determined by trader reaction to .6295.

Bearish Scenario

A sustained move under .6295 will indicate the presence of sellers. The next downside target is the long-term Fibonacci level at .6231. This is a potential trigger point for an acceleration to the downside with the next major target the May 15, 2020 main bottom at .5921.

Bullish Scenario

A sustained move over .6295 will signal the return of buyers. The first target is the minor pivot at .6309.

Sellers could come in on the first test of .6309, but overtaking this level could trigger a short-term spike into the minor top at .6380, followed by another minor pivot at .6403.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Testing Lower End of Long-Term Retracement Zone at .6231

The New Zealand Dollar is trading nearly flat on Tuesday after hitting its lowest level in nearly two years against the U.S. Dollar. The commodity-linked currency fell overnight to a multi-year low and oil prices fell more than 1%, hurt by fears of recession and an economic slowdown in China, the top importer. Meanwhile, investors seeking safe-haven protection continued to move money into the U.S. Dollar.

The kiwi has been especially bearish lately, in part because New Zealand is running a current account deficit.

“Industrial commodities have surged well ahead of the more modest strength in NZ’s agricultural export prices,” said Alan Ruskin, macro strategist at Deutsche.

At 11:52 GMT, the NZD/USD is trading .6316, down 0.0005 or -0.08%.

After an early session setback, the NZD/USD did manage to turn higher amid a turnaround in European and U.S. stock markets, however, the move is not likely to last unless there is a dramatic turnaround in demand for higher risk assets.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6284 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

The minor range is .6569 to .6284. Its 50% level at .6427 is the nearest resistance.

The long-term range is .5469 to .7465. The market is currently trading inside its retracement zone, making the 50% level at .6467 resistance and the 61.8% level at .6231 support.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to .6321.

Bearish Scenario

A sustained move under .6321 will indicate the presence of sellers. Taking out the intraday low at .6284 will indicate the selling pressure is getting stronger with the next target the long-term Fibonacci level at .6231.

The Fib level is critical support because a failure to hold this level could trigger an acceleration to the downside with the May 15, 2020 main bottom at .5921 the key target level.

Bullish Scenario

A sustained move over .6321 will signal the presence of buyers. Taking out the intraday high at .6348 will indicate the buying is getting stronger. This could trigger a surge into the minor 50% level at .6427, followed by the long-term 50% level at .6467.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Testing Long-Term Retracement Zone at .6467 to .6231

The growth-sensitive New Zealand Dollar hit a 22-month low against the U.S. Dollar in Monday’s early trade as demand for higher risk, higher-yielding assets continued to slide on the heels of a more than 1% drop in U.S. stock index futures.

Although the Reserve Bank of New Zealand (RBNZ) was the first major central bank to raise its benchmark interest rates after the pandemic, the New Zealand Dollar has been hit hard because the Federal Reserve is widely expected to tighten monetary policy faster to stem runaway inflation. Investors chasing yields are flocking into the U.S. Dollar.

At 03:47 GMT, the NZD/USD is trading .6351, down 0.0055 or -0.86%.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. Earlier today, sellers took out the June 15, 2020 main bottom at .6381, reaffirming the downtrend.

A trade through the intraday low at .6348 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

On the upside, the first resistance is a long-term 50% level at .6467. Following this level is a minor pivot at .6500.

Daily Swing Chart Technical Forecast

Trader reaction to .6406 will determine the direction of the NZD/USD early Monday.

Bearish Scenario

A sustained move under .6406 will indicate the presence of sellers. Taking out the intraday low at .6348 will indicate the selling pressure is getting stronger.

The next major downside target is the long-term Fibonacci level at .6231.

Bullish Scenario

A sustained move over .6406 will signal the presence of buyers. Taking out the intraday high at .6412 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with potential targets the long-term 50% level at .6467 and the pivot at .6500.

Side Notes

A close over .6406 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a minimum two-day counter-trend rally.

The key level to overcome is the long-term 50% level at .6467. A failure to do so will put the NZD/USD on course for a test of the long-term Fibonacci level at .6231.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Economic Data and Central Bank Chatter in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 47 stats in focus in the week ending May 13. In the week prior, 62 stats were in focus.

For the Dollar:

Inflation is back in the spotlight, with consumer and wholesale inflation figures due out on Wednesday and Thursday.

Another spike in inflation would test support for riskier assets following the Fed’s forward guidance from last week.

On Thursday, initial jobless claims will also draw interest ahead of consumer sentiment figures on Friday.

While the stats will influence, news updates on the war in Ukraine and FOMC member chatter will also need monitoring.

In the week ending 6th May, the Dollar Spot Index rose by 0.68% to 103.660.

For the EUR:

ZEW Economic Sentiment figures for Germany and the Eurozone will be in focus on Tuesday.

On Friday, Eurozone industrial production numbers will influence.

Other stats in the week include finalized member state inflation figures for May that should have a muted impact on the EUR.

ECB President Lagarde will also draw interest on Wednesday, with the markets looking for any forward guidance on monetary policy.

For the week, the EUR rose by 0.06% to $1.0551.

For the Pound:

It is a busy week, with key stats including Q1 GDP and March industrial and manufacturing production figures.

Trade data and BRC retail sales figures are also due out but should have a muted impact on the Pound.

The Pound slid by 1.79% to end the week at $1.2348.

For the Loonie:

It’s a quiet week ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of Geopolitics, OPEC, and crude oil prices.

The Loonie ended the week down 0.21% to C$1.2875 against the U.S Dollar.

From the Asia Pacific

For the Aussie Dollar:

Business and consumer confidence will be in focus in the week ahead.

On Tuesday, NAB Business Confidence figures are due out ahead of Westpac Consumer Sentiment numbers on Wednesday.

The RBA will be eyeing the numbers, with the need to curb inflationary pressures amidst heightened economic uncertainty could test sentiment.

The Aussie Dollar rose by 0.21% to $0.7076.

For the Kiwi Dollar:

Electronic card retail sales and business PMI numbers are due out in the week ahead.

While the numbers will influence, data and news updates from China will remain key.

The Kiwi Dollar ended the week down by 0.74% to $0.6410.

For the Japanese Yen:

It’s a relatively quiet week ahead. Finalized service sector PMI numbers for April and household spending figures are due out early in the week. Expect both sets of numbers to draw plenty of interest following the BoJ’s most recent dovish signals.

The Japanese Yen declined by 0.66% to ¥130.560 against the US dollar.

Out of China

On Monday, trade data will draw interest, with the markets looking to assess the impact of China’s COVID-19 lockdown measures and the war in Ukraine on demand.

Inflation figures, due out on Wednesday, will influence.

The markets will also be looking for updates from Beijing on COVID-19 lockdown measures.

The Chinese Yuan ended the week down by 0.88% to CNY6.6667 against the US dollar.

Geo-Politics

News updates on the war in Ukraine and chatter from Russia will need continued monitoring.

The Weekly Wrap – Fed Monetary Policy Sinks Riskier Assets

The Stats

While it was a busy week on the economic calendar for the week ending May 6, 2022, the Fed monetary policy decision was the main event.

A total of 62 stats were monitored, following 56 stats in the week prior.

Of the 62 stats, 25 beat forecasts, with 30 economic indicators falling short of forecast. Seven stats were in line with forecasts.

Looking at the numbers, 20 of the stats reflected an upward trend. Of the remaining 42 stats, 36 stats were weaker.

Out of the US

Private sector PMIs were the key stats in the week ahead of nonfarm payroll numbers on Friday.

The numbers were mixed, with private sector PMI figures disappointing.

In April, the ISM Manufacturing PMI fell from 57.1 to 55.4, with the Non-Manufacturing PMI down from 58.3 to 57.1.

Labor market numbers were also dollar negative ahead of the NFP numbers. The ADP reported a 247k increase in nonfarm payrolls for April, falling short of forecasts, and a 479k rise in March.

For the week ending April 29, initial jobless claims increased from 181k to 200k.

On Friday, the stats were dollar neutral. Nonfarm payrolls increased by 428k in April, following a 428k rise in March. As a result, the US unemployment rate held steady at 3.6%.

While the stats were of interest, the Fed monetary policy decision and forward guidance were the key drivers in the week.

On Wednesday, the Fed delivered a 50 basis point rate hike, which was in line with forecasts. Fed Chair Powell also looked to calm the markets by assuring that 75 basis point hikes would not be on the table.

Relief was brief, with jitters over inflation and Fed policy returning in the second half of the week.

In the week ending May 6, 2022, the Dollar Spot Index rose by 0.68% to end the week at 103.660. In the week prior, the Index rallied by 1.72% to 102.959.

Out of the UK

It was a quiet week, with stats limited to finalized private sector PMIs. The numbers were GBP positive, with the all-important services PMI revised up from 58.3 to 58.9. Despite the upward revision, the PMI was still down from March 62.6.

On the monetary policy front, the Bank of England was in action. On Thursday. The BoE lifted rates by 25 basis points to 1.00%.

The rate hike came despite concerns over the economic outlook. However, risk aversion offset any monetary policy moves to leave the pound in the red.

In the week, the pound slid by 1.79% to end the week at $1.2348. The pound tumbled by 2.07% to $1.2573 in the week prior.

The FTSE100 ended the week down 2.08%, reversing a 0.30% gain from the previous week.

Out of the Eurozone

The German economy and private sector PMIs were the areas of focus.

It was a mixed set of numbers, with economic data from Germany disappointing.

In March, German retail sales unexpectedly fell by 0.1% versus a forecasted 0.3% increase. Unemployment also fell more slowly, leaving the German unemployment rate at 5.0%.

Trade, factory orders, and industrial production figures also sounded the alarm bells.

Germany’s trade surplus narrowed from €11.1bn to €3.2bn, with factory orders tumbling by 4.7%.

Industrial production was not much better, sliding by 3.9%, to reflect the impact of the war in Ukraine and lockdown measures in China.

Private sector PMIs were also negative, with the Eurozone’s manufacturing PMI falling to a 15-month low of 55.5. Easing lockdown measures provided some relief, with the Eurozone services PMI rising from 55.6 to 57.7 in April.

For the week, the EUR rose by 0.06% to $1.0551. In the previous week, the EUR tumbled by 2.27% to $1.0545.

The DAX fell by 3.00%, with the EuroStoxx600 and the CAC40 seeing losses of 4.55% and 4.21%, respectively.

For the Loonie

Key stats included trade and employment figures for March and April, respectively.

The stats were mixed. Canada’s trade surplus narrowed from C$3.08bn to C$2.49bn.

Employment figures were Loonie positive, with the unemployment rate falling from 5.3% to 5.2% in April. In the month, employment increased by 15.3k, following a 72.5k surge in March.

In the week ending May 6, the Loonie slipped by 0.21 to C$1.1.2875 against the greenback. The Loonie slid by 1.09% to C$1.2848 in the week prior.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rose by 0.21% to $0.7076, while the Kiwi Dollar fell by 0.74% to end the week at $0.6410.

For the Aussie Dollar

Positive stats failed to support the Aussie, with the markets also brushing aside an RBA rate hike.

Key stats included retail sales and trade data for March. Retail sales increased by 1.6%, with the trade surplus widening from A$7.457bn to A$9.314bn.

Early in the week, the RBA raised cash rates by 25 basis points to 0.35% versus a forecasted 0.25%. Monetary policy divergence remained firmly in the favor of the greenback, however.

For the Kiwi Dollar

A quiet week left the markets to consider employment change figures and the RBNZ financial stability report.

In Q1, the New Zealand unemployment rate held steady at 3.2%, with employment rising by 0.1% in the quarter.

The RBNZ provided little Kiwi dollar support in the week, however, with the RBNZ talking of a possible house price correction.

Rising prospects of a house price correction could test the RBNZ’s appetite to lift cash rates at a more aggressive pace.

Monetary policy diversion with the Fed left the Kiwi on the back foot.

For the Japanese Yen

Economic data was limited to inflation figures. There was little support for the Yen, however, despite a pickup in inflationary pressure.

In April, Tokyo’s annual core rate of inflation accelerated from 0.8% to 1.9%.

The Japanese Yen fell by 0.66% to end the week at ¥130.56 against the dollar. In the week prior, the Yen ended the week down by 0.93% to ¥129.70.

Out of China

It was a particularly quiet week, with service sector PMI numbers for April in focus.

The Caixin Services PMI slid from 42.0 to 36.2, with COVID-19 lockdown measures weighing on service sector activity.

In the week ending May 6, the Chinese Yuan declined by 0.88% to CNY6.6667. The Yuan slid by 1.65% to CNY6.6085 in the week prior.

The Hang Seng Index ended the week down 5.16%, with the CSI300 falling by 2.67%.

NZD/USD Hovering Above Nearly 2-Year Bottom at .6381

The New Zealand Dollar is under pressure late Friday, putting it in a position to challenge its June 15, 2020 main bottom at .6381. The price action represents follow-through selling related to the stunning reversal the previous session.

On Thursday, the Kiwi took a nosedive as traders raced back into the U.S. Dollar on expectations the Federal Reserve will tighten monetary policy faster than peers to stem runaway inflation.

At 20:00 GMT, the NZD/USD is trading .6405, down 0.0021 or -0.32%.

In U.S. economic news, the Labor Department presented stronger-than-expected jobs data with nonfarm payrolls increasing by 428,000 jobs in April, versus expectations of 391,000 job additions, underscoring the economy’s strong fundamentals despite a contraction in gross domestic product in the first quarter.

Additionally, the unemployment rate remained unchanged at 3.6% in the month, while average hourly earnings increased 0.3% against a forecast of a 0.4% rise.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, a trade through .6393 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

On the upside, the nearest resistance is a 50% level at .6467, followed by another 50% level at .6519.

Short-Term Outlook

The direction of the NZD/USD into the close on Friday will be determined by trader reaction to .6467.

Look for the downside bias to continue late in the day on a sustained move under .6467. This could lead to a test of the long-term main bottom at .6381. This is a potential trigger point for an acceleration to the downside with the long-term Fibonacci level at .6231 the next major target price.

A sustained move over .6467 could fuel the start of a short-covering rally. Clawing through .6520 will indicate the buying is getting stronger. This could lead to a test of the main top at .6569.

Taking out .6569 will change the main trend to up. This could trigger a surge into a pivot at .6604, followed by a resistance cluster at .6646 – .6648.

For a look at all of today’s economic events, check out our economic calendar.

Fed’s Powell Rattled NZD/USD Bears, Igniting Short-Covering Rally

The New Zealand Dollar is trading nearly flat early Thursday as traders continue to digest the Federal Reserve’s monetary policy statement and less-hawkish comments from Fed Chair Jerome Powell, while bearish traders lick their wounds following a massive short-covering rally on Wednesday.

At 03:29 GMT, the NZD/USD is trading .6545, down 0.0002 or -0.03%.

The Kiwi finished sharply higher on Wednesday after the Federal Reserve delivered a widely expected interest rate-hike. The Fed raised its benchmark overnight interest rate by half a percentage point and said it would begin shrinking the central bank’s $9 trillion asset portfolio next month in an effort to further lower inflation.

Shorts Got Spooked by Powell’s Remarks

New Dollar traders were relieved by the moves by the Fed because it delivered as promised. This was enough to stabilize the currency. However, short-sellers were spooked by less-hawkish comments from Fed Chair Jerome Powell, fueling an impressive short-covering rally that drove the Kiwi 1.7% higher on Wednesday, its largest one-day rise in two years.

Powell rattled the Kiwi bears by indicating that the central bank won’t get even more aggressive in raising rates.

“A 75-basis-point increase is not something we’re actively considering,” Powell said. “I would say I think we have a good chance to have a soft or softish landing, or outcome if you will.”

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the daily closing price reversal bottom on May 3.

A trade through .6411 will negate the chart pattern and signal a resumption of the downtrend. A move through .6902 will change the main trend to up, but bullish traders have to claw through a number of retracement levels before the NZD/USD gets there.

The minor trend is also down. A trade through .6646 will change the minor trend to up. This will confirm the shift in momentum.

Currently, the NZD/USD is trading on the strong side of a pair of 50% levels at .6529 and .6467, making them support.

On the upside, the next pivot price resistance is a pair of 50% levels at .6614 and .6658.

The major upside target and resistance zone is .6724 to .6797.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD early Thursday is likely to be determined by trader reaction to the minor pivot at .6529.

Bullish Scenario

A sustained move over .6529 will indicate the presence of buyers. If this move creates enough upside momentum then look for a labored rally into a minor pivot at .6614, followed by a minor top at .6646 and another minor pivot at .6658.

Over taking .6658 will indicate the short-covering is getting stronger. This could lead to a further rally into the major retracement zone at .6724 to .6797.

Bearish Scenario

A sustained move under .6529 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly continue into a 50% level at .6467. If this fails then look for a retest of the main bottom at .6411.

Side Notes

The first rally from any major bottom is short-covering. If buyers are going to show up, it will likely be on a 50% to 61.8% retracement of the first short-covering rally.

Wednesday’s rally while impressive, did not change the trend to up, but it did green light a possible rally. The decision for bullish traders at this time is to chance the NZD/USD higher or play for a pullback into a new higher bottom.

Remember, the trend is down so sellers are going to try to form new secondary lower tops, while countertrend buyers will be looking to form new secondary higher bottoms. Whoever wins these battles, wins the trend.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Steady Ahead of RBA, Fed Expected Rate Hikes

The New Zealand Dollar is edging higher early Tuesday as a widely expected 50-basis point rate hike by the Federal Reserve on Wednesday is completely overshadowing the prospect of higher domestic interest rates. Following a 6.9% drop in April, the Kiwi is now threatening to challenge a key support at .6200.

At 03:39 GMT, the NZD/USD is trading .6456, up 0.0021 or +0.33%.

Kiwi Traders Focusing on RBA, Fed Rate Decisions

Today’s trade is a little tentative ahead of the Reserve Bank of Australia’s (RBA) interest rate and monetary policy decisions at 04:30 GMT. Markets are wagering heavily for a move to 0.25% at the meeting, and then hike every month to around 2.5% by Christmas.

NZD/USD traders are also monitoring the U.S. Federal Reserve which is even more hawkish with 150 basis points of hikes priced in by the end of July and rates at 3% or more by year end.

Economic News: New Zealanders Keep Building Homes

Earlier today, Stats NZ reported house building consents continue to smash records, with numbers up 24 percent in the year to March to hit 50,858 residential units for the first time. Stats NZ said never before had New Zealand exceeded 50,000 consents issued in a year – and most consents result in new buildings.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6413 will signal a resumption of the downtrend. The main trend will change to up on a move through .6902.

The minor trend is also down. A trade through .6646 will change the minor trend to up. This will also shift momentum to the upside.

The NZD/USD is currently trading on the weak side of a long-term 50% level at .6467, making it resistance. This is followed by minor pivot resistance at .6530.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to .6467.

Bullish Scenario

A sustained move over .6467 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the next pivot at .6530.

Bearish Scenario

A sustained move under .6467 will signal the presence of sellers. This could lead to a retest of .6413, followed by the June 15, 2020 main bottom at .6381. This is a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

Markets Predicting RBA Rate Hike to 0.25% This Week

The Australian and New Zealand Dollars closed sharply lower last week as worries about a recession in Europe and a slowdown in China dampened demand for risky assets and offset the promise of rising domestic interest rates.

The prospect of a series of aggressive interest rate hikes by the U.S. Federal Reserve, starting with this week’s monetary policy meeting May 3-4, also sparked a rush from the Aussie and Kiwi to the U.S. Dollar.

Last week, the AUD/USD settled at .7062, down 0.0182 or -2.52% and the Invesco CurrencyShares Australian Dollar Trust finished at $70.04, down $1.70 or -2.37%. The NZD/USD closed at .6458, down 0.0177 or -2.68%.

Australian Inflation Hits 20-Year High, May Rate Rise Seen in Play

Australian consumer prices surged at the fastest annual pace in two decades last quarter as petrol, home building and food costs all climbed, fueling speculation interest rates could rise from record lows as soon as next week.

The consumer price index (CPI) jumped 2.1% in the first quarter, topping market forecasts of a 1.7% increase. The annual pace picked up to 5.1%, from 3.5% the previous quarter and the highest since 2001.

A closely watched measure of core inflation, the trimmed mean, hit a record 1.4% in the quarter, taking the annual pace to the highest since early 2009 at 3.7%.

The data bolstered a growing view that the Reserve Bank of Australia (RBA) no longer needs to keep interest rates at emergency lows of 0.1% and should tighten soon, perhaps even at its next policy meeting on May 3 rather than in June.

Weekly Forecast

Even the imminent prospect of the first Australian rate rise in a decade could not help the currency gain ground last week.

Red-hot inflation figures have convinced investors the Reserve Bank of Australia (RBA) can no longer keep rates at emergency lows of 0.1% and futures are now fully priced for a hike to 0.25% this week.

The markets are also predicting a move to 0.5% in June and rates around 2.5% by year end, implying there will be a couple of hikes of 50 basis points at some stage. That would be a radical departure for the RBA given the last time it hiked by more than 25 basis points was in early 2000.

Normally, a rate hike would boost a currency, but with the Fed widely expected to hike rates by 50-basis points on May 4, the Australian and New Zealand Dollars will have a hard time mounting a meaningful rally.

This doesn’t mean, however, that we won’t see a short-covering rally after the Fed announcements because the move has been telegraphed for weeks, creating a “sell the rumor, buy the fact” situation.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Its All Eyes on the Fed, with the BoE also in Focus

On the Macro

It is a busy week ahead on the economic calendar, with stats 68 due out through the week ending May 6. In the week prior, 56 stats were in focus.

For the Dollar:

It is a big week ahead. On the economic data front, ISM survey PMIs will influence this Monday and Wednesday, with Wednesday’s ISM Non-Manufacturing PMI the main driver.

The US labor market will also be in focus, with the ADP nonfarm employment change figures and official nonfarm numbers due out on Wednesday and Friday.

The main event of the week, however, is the FED’s monetary policy decision. A larger than expected rate hike will spook the markets.

In the week ending April 29, 2022, the Dollar Spot Index surged by 1.72% to end the week at 102.959. In the week prior, the Index rose by 0.72% to 101.22.

For the EUR:

On Monday, manufacturing PMIs and German retail sales will draw interest ahead of German unemployment figures on Tuesday.

On Wednesday, the market attention will shift to service sector PMIs, German trade data, and Eurozone retail sales.

Over the remainder of the week, the German economy will remain in the spotlight. On Thursday, German factory orders are due out ahead of industrial production figures on Friday.

For the week, the EUR slumped by 2.27% to $1.0545. In the previous week, the EUR fell by 0.19% to $1.0790.

For the Pound:

It is a relatively quiet week, with economic data limited to finalized private sector PMI numbers. Expect any revisions to the services PMI to have a greater influence.

Following last week’s tumble, however, the Bank of England monetary policy will be the Pound’s key driver.

In the week, the Pound tumbled by 2.07% to end the week at $1.2573. In the week prior, the Pound slid by 1.69% to $1.2839.

For the Loonie:

Mid-week, trade data will draw interest ahead of employment figures due out on Friday.

On Friday, Ivey PMI numbers for April should have a muted impact on the Loonie.

In the week ending April-29, the Loonie slid by 1.09 to C$1.2848 against the Greenback. In the week prior, the Loonie fell by 0.79% to C$1.2710.

From the Asia Pacific

For the Aussie Dollar:

It is a busy week ahead. Key stats include manufacturing numbers on Monday ahead of retail sales and trade data on Wednesday and Thursday.

While the stats will influence, the RBA monetary policy decision and rate statement will be the key drivers. A larger-than-expected rate hike or the talk of a more aggressive rate path trajectory would support an Aussie Dollar breakout.

At the end of the week, the RBA will also release its Statement on Monetary Policy.

In the week, the Aussie Dollar tumbled by 2.53% to $0.7061.

For the Kiwi Dollar:

On the economic data front, labor market conditions will be in focus. Employment change figures for Q1 and New Zealand’s unemployment rate will be the key stats of the week.

On the monetary policy front, the RBNZ will release its financial stability report on Wednesday and hold a press conference that will likely be the main event of the week.

The Kiwi Dollar ended the week down 2.73% to end the week at $0.6458.

For the Japanese Yen:

It is a quiet week ahead, with stats limited to finalized private sector PMIs and inflation.

We don’t expect the numbers to influence, however, leaving the Yen in the hands of monetary policy divergence.

The Japanese Yen fell by 0.93% to end the week at ¥129.70 against the Dollar.

Out of China

It is another quiet week ahead, with service PMI numbers for April due out on Thursday. Following last week’s assurances of economic support, the markets will be more interested in any chatter from Beijing on how to boost economic activity.

Private sector PMIs from the weekend reflected the need for policy support.

In April, the Caixin Manufacturing PMI fell from 48.1 to 46.0, with the NBS Manufacturing PMI declining from 49.5 to 47.4.

In the week ending April-29, the Chinese Yuan slid by 1.65% to CNY6.6085. The Yuan tumbled by 2.04% to CNY6.5014 in the week prior.

Geo-Politics

Russia and Ukraine will remain the area of focus in the week ahead.

The Weekly Wrap – Monetary Policy and Economic Woes Drive Dollar Demand

The Stats

It was a busy week on the economic calendar for the week ending April-29, 2022.

A total of 56 stats were monitored, following 57 stats in the week prior.

Of the 56 stats, 26 beat forecasts, with 26 economic indicators falling short of forecasts. 4 stats were in line with forecasts.

Looking at the numbers, 30 of the stats reflected an upward trend. Of the remaining 26 stats, 25 stats were weaker.

Out of the US

Core durable goods orders and consumer sentiment drew interest on Tuesday. The stats were market positive, with core durable goods orders rising by 1.1% in March.

Consumer sentiment held steady in April, which was also market positive. The CB Consumer Confidence Index slipped from 107.6 to 107.3.

On Thursday, US GDP numbers disappointed, however, with the US economy contracting by 1.4%. In the previous quarter, the economy expanded by 6.9%.

At the end of the week, inflation and personal spending were market positive. Personal spending rose by 1.1% in March, while inflationary pressures softened. The Core PCE Price Index increased by 5.2% year on year in March, down from 5.3% in February.

In the week ending April 29, 2022, the Dollar Spot Index surged by 1.72% to end the week at 102.959. In the week prior, the Index rose by 0.72% to 101.22.

Out of the UK

It was a particularly quiet week, with stats limited to CBI Industrial Trend Orders. In April. Industrial Trend Orders fell from 26 to 14, which was Pound negative.

Risk aversion and market sentiment towards Fed monetary policy ultimately left the Pound deep in the red.

In the week, the Pound tumbled by 2.07% to end the week at $1.2573. In the week prior, the Pound slid by 1.69% to $1.2839.

The FTSE100 ended the week up 0.30%, partially reversing a 1.24% loss from the previous week.

Out of the Eurozone

Early in the week, German business and consumer sentiment diverged. While business sentiment improved, consumer sentiment weakened further.

The Ifo Business Climate Index increased from 90.8 to 91.8 in April, while the Gfk German Consumer Climate Index fell from -15.7 to -26.5.

In the second half of the week, the market focus shifted to inflation and economic growth.

The stats were market positive, with German and the Eurozone GDP numbers for the first quarter providing support.

In Q1 2022, the German economy expanded by 4.0% year on year, up from 1.8% in the previous quarter.

The Eurozone’s economy grew by 5.0% year on year, up from 4.6% in the quarter prior.

On the inflation front, inflationary pressures ticked up further, though only moderately. According to prelim figures, the Eurozone’s annual rate of inflation picked up from 7.4% to 7.5%.

For the week, the EUR slumped by 2.27% to $1.0545. In the previous week, the EUR fell by 0.19% to $1.0790.

The CAC40 fell by 0.73%, with the EuroStoxx600 and the DAX seeing losses of 0.64% and 0.31%, respectively.

For the Loonie

It was also a quiet week, with economic data limited to February GDP numbers.

While Loonie positive, the numbers had a muted impact on the Loonie following the latest Bank of Canada rate hike.

In February, the economy grew by 1.1%, accelerating from 0.2% growth in January.

In the week ending April-29, the Loonie slid by 1.09 to C$1.2848 against the Greenback. The Loonie fell by 0.79% to C$1.2710 in the week prior.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar tumbled by 2.53% to $0.7061, with the Kiwi Dollar sliding by 2.73% to end the week at $0.6458.

For the Aussie Dollar

Inflation was in focus mid-week.

The stats were Aussie Dollar positive, supporting a near-term RBA move on cash rates. Monetary policy divergence remained strongly in favor of the Greenback, however.

In Q1, Australia’s annual rate of inflation accelerated from 3.5% to 5.1%. Wholesale inflationary pressure also picked up, with the annual wholesale rate of inflation accelerating from 3.7% to 4.9%.

For the Kiwi Dollar

Trade data and business confidence were in focus in the week, with the stats Kiwi dollar negative.

In March, New Zealand’s trade deficit widened from NZ$8,680m to NZ$9,110m.

The ANZ Business confidence slipped from -41.9 to -42.0 in April.

For the Japanese Yen

On the economic data front, industrial production and retail sales figures for March were in focus. The stats were Yen negative.

Industrial production increased by a modest 0.3% after rising by 2.0% in February.

Retail sales provided some relief, rising by 0.3% year on year. In February, retail sales declined by 0.9%.

On the monetary policy front, the Bank of Japan was also in action, though there were no surprises to support the Yen.

The Japanese Yen fell by 0.93% to end the week at ¥129.70 against the Dollar. In the week prior, the Yen ended the week down by 1.61% to ¥128.50.

Out of China

It was a particularly quiet week, with no economic data from China to influence market risk sentiment.

In the week ending April-29, the Chinese Yuan slid by 1.65% to CNY6.6085. The Yuan tumbled by 2.04% to CNY6.5014 in the week prior.

The Hang Seng Index ended the week up 2.18%, with the CSI300 gaining by 0.07%.

Drop in Investor Sentiment Fuels Late-Session NZD/USD Weakness

The New Zealand Dollar is trading lower late Friday, approaching another multi-year low, as U.S. Treasury yields jumped after another inflation reading showed prices on the rise. A plunge in U.S. equities is also weighing on demand for commodity-linked and higher-risk currencies.

At 20:03 GMT, the NZD/USD is trading .6456, down 0.0031 or -0.48%.

A hot inflation report Friday underscored the difficult macro environment. The core personal consumption expenditures price index – the Fed’s preferred inflation gauge – rose 5.2% from a year ago.

Meanwhile, rising inflation and the Fed’s plans to aggressively hike interest rates in order to combat these pricing pressures have fueled investor concerns of a slowdown in economic growth. These events helped drive U.S. stocks sharply lower in a move that spread to the New Zealand Dollar late in the session.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6452 will signal a resumption of the downtrend. A move through .6902 will change the main trend to up.

The minor trend is also down. A trade through .6646 will change the minor trend to up. This will also shift momentum to the upside.

The NZD/USD is currently testing a long-term retracement zone at .6467 to .6231.

On the upside, the first resistance is a minor pivot at .6549, followed by a pair of minor 50% levels at .6633 and .6677.

Short-Term Outlook

The NZD/USD is currently in a position to break further with the next target the June 15, 2020 main bottom at .6381. This is a potential trigger point for an acceleration into a long-term Fibonacci level at .6231.

Holding the long-term 50% level at .6467 will indicate the presence of buyers, but we won’t be able to get excited about the upside potential until the minor or the main trend changes to up.

Since traders have fully-priced a 50-basis point rate hike by the Fed on May 4, the actual announcement could trigger a short-covering rally. However, gains are likely to be capped because of worries over a potential global economic slowdown due to the COVID-related lockdowns in China and the on-going war between Russia and Ukraine.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD: Hot CPI Data Fueling Speculation of Early Rate Hike

The Australian and New Zealand Dollars are edging higher on Wednesday as the commodity-linked currencies try to recover from a beat down earlier in the week. The Aussie is currently hovering just above a two-month low, while the Kiwi is coming off its lowest level this year.

The Aussie Dollar is also getting a boost from higher-than-expected inflation data that tightened the chances of an earlier than expected Reserve Bank of Australia (RBA) rate hike.

At 11:21 GMT, the AUD/USD is trading .7148, up 0.0023 or +0.33%. The NZD/USD is at .6584, up 0.0020 or +0.30%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.96, down $0.14 or -0.20%.

Australian Dollar Gets Minor Lift from Major Inflation Shock

The Australian Dollar got a much-needed lift on Wednesday as data showed inflation blew past all expectations last quarter, narrowing the odds on a rate rise as early as next week, according to Reuters.

Gains are being limited as investors have already priced in a whole series of rate hikes from the RBA. Furthermore, most of the attention has turned toward Chinese COVID lockdowns and dropping demand for high-yielding assets.

Australian Inflation Hits 20-Year High Putting May Rate Hike on Table

Australian consumer prices surged at the fastest annual pace in two decades last quarter as gasoline, home building and food costs all climbed, fueling speculation interest rates could rise from record lows as soon as next week.

Wednesday’s data showed the consumer price index (CPI) jumped 2.1% in the first quarter, topping market forecasts of a 1.7% increase. The annual pace picked up to 5.1%, from 3.5% the previous quarter and the highest since 2001.

A closely watched measure of core inflation, the trimmed mean, hit a record 1.4% in the quarter, taking the annual pace to the highest level since early 2009 at 3.7%.

That was the first time since 2010 that core inflation had lifted above the Reserve Bank of Australia’s (RBA) 2-3% target band, a radical turnaround from recent years when it consistently undershot.

Short-Term Outlook

The AUD/USD is likely to be underpinned most of the session on Wednesday as the CPI data bolstered a growing view that the RBA no longer needs to keep interest rates at emergency lows of 0.1% and should tighten soon, perhaps even at its next policy meeting on May 3 rather than in June.

Today’s early strength is likely being fueled by short-covering since real buyers are nervous about the Fed’s plan to rapidly increase interest rates and the lower demand for commodities and even riskier stocks. Therefore, we expect any short-term gains to be capped until the AUD/USD can build a solid support base.

For a look at all of today’s economic events, check out our economic calendar.