NZD/USD Forex Technical Analysis – .6629 Next Trigger Point for Upside Breakout

The New Zealand Dollar finished slightly better on Friday after recovering from an early session setback. Initially, the Kiwi was driven lower by increased demand for the safe-haven greenback as investors responded to renewed concerns about the surge in coronavirus infections in the United States and around the world.

The currency rebounded, however, as the U.S. Dollar lost its safe-haven allure on hopes of a potential vaccine for the novel coronavirus. That news helped drive up demand for higher-risk assets while pushing the U.S. Dollar lower.

On Friday, the NZD/USD settled at .6571, up 0.0002 or +0.03%.

The story that shifted sentiment on Friday was the news that Gilead Sciences said additional data from a late-stage study showed its antiviral remdesivir reduced the risk of death and significantly improved the conditions of severely ill COVID-19 patients.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, the closing price reversal top at .6600 on July 9 suggests that momentum could shift to the downside. A trade through .6600 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down if sellers take out the nearest swing bottom at .6385.

The minor trend is also up. A trade through .6519 will change the minor trend to down. This will confirm the shift in momentum.

The short-term range is .6381 to .6600. If the minor trend changes to down then its retracement zone at .6490 to .6465 will become the primary target zone.

Short-Term Outlook

Demand for risk is likely to continue to set the tone. Risk sentiment will be lifted if scientists continue to make progress toward a coronavirus vaccine, However, investors will continue to weight this evidence against the rapid-rising cases of coronavirus around the world.

On the upside, taking out .6600 should lead to a test of the January 24 main top at .6629. This is a potential trigger point for an acceleration to the upside since the next major target is way up at .6756.

On the downside, a pullback to .6490 to .6465 will represent a normal correction. However, longs will start getting nervous if .6465 fails as support.

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

The Weekly Wrap – Economic Data and COVID-19 Continued to Girate the Markets

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 10th July.

A total of just 30 stats were monitored, following the 74 stats from the week prior.

Of the 30 stats, 20 came in ahead forecasts, with 9 economic indicators coming up short of forecast. 1 stats were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 6, all 6 stats reflected a deterioration from previous.

For the Greenback, it was a 3rd consecutive week in the red. In the week ending 10th July, the Dollar Spot Index fell by 0.54% to 96.652. In the week prior, the Dollar had fallen by 0.27%.

COVID-19 updates drew greater focus, with a lighter economic calendar unable to distract the markets.

For the U.S, the daily COVID-19 numbers continued to spike to fresh highs in the week. At the end of the week, news of progress towards a successful treatment drug delivered riskier assets with support, however.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 12,604,895 for Friday, rising from last Friday’s 11,175,074 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,429,821 on a global basis. This was higher than the previous week’s increase of 1,290,881 in new cases.

In the U.S, the total rose by 399,290 to 3,285,550. In the week prior, the total number of new cases had risen by 338,384. An upward trend was evident throughout the week once more.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 7,406 to bring total infections to 743,215. In the previous week, the total number of new cases had risen by 6,464.

Out of the U.S

It was a relatively quiet week on the economic data front.

Key stats included June’s ISM Non-Manufacturing PMI, May’s JOLT’s job openings, and the weekly jobless claims.

The stats were skewed to the positive, with the U.S non-manufacturing sector expanding in June.

On the labor market front, JOLTs job openings increased from 4.996m to 5.397m. More importantly, the weekly initial jobless claims rose by 1.314m in the week ending 3rd July. This was down from 1.413m in the week prior.

While the stats were positive, COVID-19 updates from the U.S were particularly dire, providing the Greenback with some support.

In the equity markets, the NASDAQ rallied by 4.01%, with the Dow and S&P500 gaining 0.96% and 1.76% respectively.

Out of the UK

It was also a relatively quiet week on the economic calendar. June’s construction PMI, 1st quarter labor productivity, and house prices were in focus.

A sharp rebound in construction sector activity was positive, with the PMI jumping from 28.9 to 55.3.

House prices also bottomed out, with news of an adjustment to stamp duty thresholds also positive for the sector.

Ultimately, however, it was Brexit chatter that provided the Pound with support in the week.

Following the curtailed talks from the previous week, the EU hinted at a willingness to compromise, raising hopes of a deal.

In the week, the Pound rose by 1.11% to $1.2622, following a 1.19% gain in the previous week. The FTSE100 ended the week down by 1.01%, with a 1.73% slide on Thursday delivering the loss.

Out of the Eurozone

It was a relatively busy week economic data front, with Germany in focus.

Germany’s factory orders, industrial production and trade data for May were in focus in the week. On Friday, French and Italian production figures caught the market’s attention.

From Germany, the stats were skewed to the negative based on forecasts. Both factory orders and industrial production rose by less than forecast.

Germany’s trade balance came in ahead of forecasts, which provided some support.

Construction figures from Germany and the Eurozone’s retail sales figures for May had a muted impact in the week.

At the end of the week, industrial production figures from France and Italy delivered a boost.

For the week, the EUR rose by 0.46% to $1.1300, following a 0.26% gain from the previous week.

For the European major indexes, it was a mixed week. The CAC30 fell by 0.73%, while the DAX30 and EuroStoxx600 saw gains of 1.15% and 0.38% respectively.

For the Loonie

It was a relatively busy week on the economic calendar.

Key stats included June’s Ivey PMI, housing data, and the all-important employment figures for June.

The stats were skewed to the positive. The Ivey PMI jumped from 39.1 to 58.2 in June. More impressively, employment jumped by 952,900 following a 289,600 rise in May.

As a result of the jump in hiring, the unemployment rate fell from 13.7% to 12.3%.

While the stats were skewed to the positive, COVID-19 jitters and a negative monthly IEA report weighed.

The Loonie fell by 0.33% to end the week at C$1.3592 against the Greenback. In the week prior, the Loonie had risen by 0.27%.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 10th July, the Aussie Dollar rose by 0.16% to $0.6950, with the Kiwi Dollar rising by 0.66% to $0.6574.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar, with no material stats to provide direction.

While there were no stats, the RBA was in action on Tuesday, standing pat on monetary policy. This was in line with market expectations, limiting any major moves by the Aussie Dollar.

In the week, the government closed down the border between Victoria and New South Wales due to fresh new cases…The latest spread pinned the Aussie Dollar back in the week.

For the Kiwi Dollar

It was also a relatively quiet week on the economic data front.

Key stats were limited to 2nd quarter business confidence figures and June electronic card retail sales figures.

While both were Kiwi Dollar positive, there was nothing impressive to give the Kiwi a major boost.

For the Japanese Yen

It was a quiet week on the data front.

Household spending figures for May delivered more bad news early in the week. Year-on-year, household spending was down by 16.2%, following an 11.1% decline in April.

Month-on-month, spending fell by 0.1%, following a 6.2% slide in April. In contrast to other economies, consumers appeared unwilling to loosen the purse strings, which will be of concern for the government.

While the stats were negative, concerns over COVID-19 delivered the upside for the Yen in the week.

The Japanese Yen rose by 0.54% to end the week at ¥106.93 against the Greenback. In the week prior, the Yen had fallen by 0.27% against the U.S Dollar.

Out of China

It was a quiet week on the economic data front, with June inflation figures in focus.

The stats were skewed to the positive, though ultimately of little influence.

A lack of chatter from Washington and Beijing allowed the markets to move beyond the recent war of words.

Tensions over Hong Kong are unlikely to abate anytime soon, however. Positive sentiment towards an economic rebound in China drove demand for equities in the week.

News had also hit the wires in the early part of the week of a reported priority to foster a “healthy” bull market.

In the week ending 10th July, the Chinese Yuan rose by 0.95% to end the week at CNY6.9994 against the Greenback.

The CSI300 rallied by 7.55% in the week, with the Hang Seng gaining 1.40%.

NZD/USD Forex Technical Analysis – Momentum Shift Could Lead to Test of .6490-.6465

The New Zealand Dollar is trading lower on Friday after reaching its highest level since January 24, during the previous session. Furthermore, following a prolonged move up in terms of price and time, the Kiwi posted a potentially bearish closing price reversal top, which suggests the selling may be greater than the buying just slightly below its nearest main top at .6629. If confirmed, the closing price reversal top could trigger the start of a 2 to 3 day counter-trend break.

At 03:01 GMT, the NZD/USD is trading .6554, down 0.0015 or -0.23%.

Helping to drive the New Zealand Dollar lower is surging demand for the U.S. Dollar. The dollar and other safe-haven currencies are being well bid on Friday after a jump in new coronavirus cases in the United States further undermined the case for a quick economic recovery.

More than 60,000 new COVID-19 infections were reported across the United States on Wednesday, the greatest single-day tally by any country in the pandemic so far, discouraging some American consumers to return to public spaces.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is starting to trend lower with the formation of the closing price reversal top on Thursday.

A trade through .6600 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through the series of main bottoms at .6385, .6383 and .6381.

The minor trend is also up. It will change to down on a move through the last minor bottom at .6519. This will confirm the shift in momentum.

The short-term range is .6381 to .6600. Its retracement zone at .6490 to .6465 is the first downside target. Since the main trend is up, buyers could come in on a test of this zone.

The main range is .5921 to .6585. If the main trend changes to down then look for the selling to possible extend into its retracement zone .6260 to .6180.

Daily Swing Chart Technical Forecast

Based on yesterday’s closing price reversal top and the early price action, the direction of the NZD/USD on Friday is likely to be determined by trader reaction to Thursday’s low at .6551.

Bearish Scenario

A sustained move under .6551 will indicate the presence of sellers. This move will confirm the closing price reversal top and could trigger a break into the minor bottom at .6519, followed closely by the retracement zone at .6490 to .6465.

Bullish Scenario

A sustained move over .6551 will signal the presence of buyers. This could create enough upside momentum to fuel a retest of .6600, followed by the January 24 top at .6629.

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

COVID-19 Drives Demand for the Dollar, with Very Little Else to Distract the Markets

Earlier in the Day:

It was another relatively quiet start to the day on the economic calendar. The Kiwi Dollar was in focus in the early part of the day.

Away from the economic calendar COVID-19 continued to be a major source of angst for the markets, as new cases surged in the U.S.

Looking at the latest coronavirus numbers

On Thursday, the number of new coronavirus cases rose by 223,514 to 12,386,140. On Wednesday, the number of new cases had risen by 222,368. The daily increase was higher than Wednesday’s rise while higher than 190,716 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,190 new cases on Thursday, which was up from 986 new cases on Wednesday. On the previous Thursday, 1,027 new cases had been reported.

From the U.S, the total number of cases rose by 61,067 to 3,219,999 on Thursday. On Wednesday, the total number of cases had increased by 62,416. On Thursday, 2nd July, a total of 48,853 new cases had been reported.

For the Kiwi Dollar

Electronic card retail sales increased by 16.3% in June, following a 78.9% jump in May.

According to NZ Stats,

By Industry, the movements were:

  • Durables, up NZ$310m (24%), with consumables up NZ$205m (11%).
  • Motor vehicles (excl. fuel) rose NZ$45m (26%), while spending on fuel fell NZ$84m (15%).
  • Spending on apparel rose NZ18m (5.7%), while spending on hospitality fell NZ$74m (7.3%).

In more detail:

  • Monthly spending on medical and other health care services reached a record high in Jun-20. Spending jumped by 20% from Jun-19.
  • Spending at restaurants, cafes, and takeaway was nearly back to pre-COVID-19 levels, while down by 2.4% on Jun-19.
  • Pent up demand led to a further rise in spending on long-lasting goods. Furniture, electrical, and hardware retailing was up by 27% from Jun-19.

The Kiwi Dollar moved from $0.65703 to $0.65691 upon release of the numbers. At the time of writing, the Kiwi Dollar down by 0.26% to $0.6553.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.11% to ¥107.08 against the U.S Dollar, while the Aussie Dollar was down by 0.27% to $0.6945.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

A lack of stats leaves the EUR in the hands of market risk appetite on the day. With the ECB in action next week, COVID-19 and geopolitics will be key drivers early on in the day.

At the time of writing, the EUR was down by 0.06% to $1.1278.

For the Pound

It’s also a particularly quiet day ahead on the economic calendar. There are no material stats due to provide the Pound with direction.

A lack of stats leaves the Pound in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was down by 10% to $1.2593.

Across the Pond

It’s also a relatively busy day ahead for the U.S Dollar. Later today, wholesale inflation figures for June are due out later today.

Barring particularly dire numbers, however, the stats should have a muted impact on the Dollar and risk sentiment.

Expect any chatter from Washington and COVID-19 updates to remain in focus.

At the time of writing, the Dollar Spot Index was up by 0.16% to 96.850.

For the Loonie

It’s a relatively busy day ahead on the calendar. June’s employment figures are due out later today. Expect the numbers to have a material impact on the Loonie, with the BoC in action next week.

Away from the economic calendar, sentiment towards the economic outlook and demand for crude will also provide direction. The IEA’s monthly report will draw attention today amidst the risk-off sentiment.

At the time of writing, the Loonie was down by 0.06% to C$1.3594 against the U.S Dollar.

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

Brexit, COVID-19, and U.S Weekly Jobless Claims in the Spotlight

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar. The Pound and the Aussie Dollar, by proxy, were in focus in the early part of the day.

Away from the economic calendar COVID-19 and geopolitics continued to be a major source of angst for the markets.

Looking at the latest coronavirus numbers

On Wednesday, the number of new coronavirus cases rose by 222,368 to 12,130,571. On Tuesday, the number of new cases had risen by 227,176. The daily increase was lower than Tuesday’s rise while higher than 210,499 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 986 new cases on Wednesday, which was up from 776 new cases on Tuesday. On the previous Wednesday, 1,062 new cases had been reported.

From the U.S, the total number of cases rose by 62,416 to 3,162,416 on Wednesday. On Tuesday, the total number of cases had increased by 67,655. On Wednesday, 1st July, a total of 51,607 new cases had been reported.

Out of China

June’s inflation figures were in focus this morning. China’s annual rate of inflation picked up from 2.40% to 2.5%. Economists had forecast an annual rate of inflation of 2.50%. Month-on-month, consumer prices fell by 0.1%, following a 0.8% decline in May. Economists had forecast a 0.5% decline.

Wholesale deflationary pressures eased marginally in June, with the producer price index falling by 3% year-on-year. In May, the index had fallen by 3.7%. Economists had forecast a 3.2% decline

At the time of writing, the Aussie Dollar was down by 0.07% to $0.6977.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.07% to ¥107.34 against the U.S Dollar, with the Kiwi Dollar down by 0.09% to $0.6569.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Germany’s trade data for May will be in focus later this morning.

Barring a further narrowing in the trade surplus, however, the data should have a relatively muted impact on the EUR.

Expect updates from Brexit talks, COVID-19 and geopolitics to be the key drivers on the day.

At the time of writing, the EUR was up by 0.04% to $1.1334.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due to provide the Pound with direction.

A lack of stats leaves the Pound in the hands of Brexit as talks resumed on Wednesday. Any agreement on EU access to Britain’s fisheries and expect the Pound to jump.

Earlier in the day, June’s RICS House Price Balance figures had a muted impact on the Pound. The RICS House Price Balance survey showed that a net balance of -15% of respondents saw some degree of house price decline over the survey period. This was an improvement from a net -32% of respondents in May. Economists had forecast a net balance of -25%.

At the time of writing, the Pound was flat at $1.2610.

Across the Pond

It’s also a quiet day ahead for the U.S Dollar. Later today, the weekly jobless claims figures will draw plenty of attention. While nonfarm payrolls have impressed, the weekly claims numbers continue to raise red flags…

Another sizeable jump and the markets may need to question the upbeat sentiment towards the labor market recovery.

Away from the economic calendar, expect COVID-19 news and any chatter from Washington to also influence on the day.

At the time of writing, the Dollar Spot Index was up by 0.07% to 96.493.

For the Loonie

It’s another quiet day ahead on the calendar. May building permit figures are due out of Canada later today.

We don’t expect too much influence from the numbers, however.

Risk sentiment will remain the key driver as the markets begin to consider the Bank of Canada’s monetary policy decision next week.

At the time of writing, the Loonie was down by 0.04% to C$1.3517 against the U.S Dollar.

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

A Quiet Economic Calendar Leaves COVID-19 to Test the Risk Appetite

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar. Japan’s current account figures for May were all that the markets had to consider from the calendar.

Away from the economic calendar risk-off sentiment through the European and U.S session tested the majors early on.

COVID-19 remains a key risk as the number of new cases continues to rise amidst efforts to reopen economies.

Looking at the latest coronavirus numbers

On Tuesday, the number of new coronavirus cases rose by 227,176 to 11,940,258. On Monday, the number of new cases had risen by 177,554. The daily increase was higher than Monday’s rise and 201,507 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 776 new cases on Tuesday, which was down from 1,876 new cases on Monday. On the previous Tuesday, 934 new cases had been reported.

From the U.S, the total number of cases rose by 67,655 to 3,096,516 on Tuesday. On Monday, the total number of cases had increased by 45,706. On Tuesday, 30th June, a total of 53,471 new cases had been reported.

For the Japanese Yen

Japan’s current account surplus rose from ¥0.263tn to ¥1.177tn in May. Economists had forecast surplus of ¥1.088tn.

The Japanese Yen moved from ¥107.561 to ¥107.643 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.14% to ¥107.67 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.16% to $0.6936, with the Kiwi Dollar down by 0.06% to $0.6542.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar, with no material stats due out of the Eurozone to provide direction.

Geopolitics and market sentiment towards the recent spike in new COVID-19 cases will leave the EUR exposed to any risk aversion.

At the time of writing, the EUR was up by 0.01% to $1.1275.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due to provide the Pound with direction.

With Brexit negotiations in focus this week, expect plenty of updates that could rock the Pound. Risk sentiment may have a greater influence, however, as the Pound builds resilience against the Brexit chatter…

At the time of writing, the Pound was up by 0.06% to $1.2550.

Across the Pond

It’s also a particularly quiet day ahead for the U.S Dollar. There are no material stats to provide the Dollar and the broader market with direction.

That leaves COVID—19 and geopolitics in focus on the day, which tends to be a bad thing for riskier assets…

At the time of writing, the Dollar Spot Index was up by 0.09% to 96.966.

For the Loonie

It’s also a quiet day ahead on the calendar. With no material stats due out, the Loonie will be in the hands of the weekly crude oil inventory numbers and risk sentiment.

At the time of writing, the Loonie was down by 0.01% to C$1.3605 against the U.S Dollar.

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

Buyers Will Have to Defend the Recent Gains

The first Monday in July started off positively with indices heading higher. This could have been triggered by traders’ good mood following the US Independence Day, or optimism over the COVID pandemic, perhaps it’s the freshly printed US dollars from the Federal Reserve, flooding the market. Instead of focusing on what has happened, let’s focus on what will probably happen next.

Let’s start with the SP500, on Monday it broke a crucial mid-term resistance on the 3155 point. This resistance has held its own since mid-June, buyers tried to break it a few times but failed, which makes it a significant level. This area was broken during the Asian session and the price remained above it during the European and American hours. The SP500 tested the broken resistance as a close support during the beginning of the European session on Tuesday. It’s crucial to hold the price above this support level to get a mid-term buy signal. Otherwise, we may experience a false bullish breakout pattern, which may be pretty unpleasant for demand.

Moving on the NZDUSD, the price of the pair is currently correcting the bullish movement that happened after the defense of the 0.639 support level and the breakout of the dynamic down trendline. Here, the price is also testing the broken horizontal resistance as a close support, which can work out for sellers.

Meanwhile the NZDCAD’s price is bouncing from the major down trendline on the weekly chart. As long as the price stays below the trendline, sentiment is negative. More will be revealed on Friday when we can view the shape of the weekly candle. Anything with a bearish body, will be considered a sell signal.

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

Theres a Bull in a China’s Shop

With the China A50 index (CN50 on MT4/5) putting on a lazy 7.5%, while the Hang Seng, the index where we saw the bulk of client flow, rallied 3.8%. Things have settled down a touch today, but China is a truly hot market – For perspective, the A50 index has gained 24% in 16 trading sessions.

*Pepperstone clients can trade the A50 index (CN50) and Hang Seng (HK50), as well as USDCNH (yuan traded in HK). The A50 index being the top 50 Chinese mainland companies traded as a futures index on the Singapore exchange – it has a 96% correlation with the CSI 300.

Volume has been incredible too, with 40.58b shares traded through the CSI 300 on Monday – the most since 15 July 2015, with turnover some 212% above the 30-day average. Offshore funds were big buyers of Chinese equities, with orders through the HK to Shanghai (Northbound) ‘connect’ coming in at record levels ($45.12b). They were also big buyers of CNH too, as we can see in the daily chart of USDCNH, with price smashing through the 200-day MA. If USDCNH is trading lower, then it will subsequently put a bid in EURUSD, AUDUSD and NZDUSD too.

Watch this space, but if Chinese equities are going higher and offshore funds want to get exposure via HK, then USDCNH should trade lower.

Listed brokers are flying, as you’d imagine when we see such intense volume through the exchanges, and if we look at broker names traded in HK, we can see some outrageous one-day moves. Some chunky earnings upgrades from CICC are also helping, with the investment bank now seeing 25% y/y growth, although the absolute flow and appetite for equity is obviously the main rationale for buying brokers.

Monday’s one-day move in Chinese HK-listed brokers

Should the bulls be worried about excessive leverage just yet?

We can look at the level of margin debt used for equity transactions as a vehicle for leveraging up and speculating on financial markets, and here we see this figure hitting RMB12t on Friday – one suspects this would be higher now, although, it is still only half of below the outstanding balance in June 2015, when, of course, we saw rampant equity speculation. A relaxation of the rules governing margin trading (http://www.chinadaily.com.cn/business/2015-06/13/content_20992267.htm) in June from the CSRC (China Securities Regulatory Commission) is clearly in play and helping sentiment.

One consideration is that given the increase in the market capitalization of China’s equity markets is that margin transactions as a percentage of market cap is still only around 14%, where this reached 27% in 2015. We also see margin financing as a percentage of free float sitting at 4% vs 10% in 2015. Neither are at outrageous levels and this is a strong consideration for the regulator, who on one hand see advantages in higher asset prices but has a strong consideration for financial stability. It doesn’t feel like authorities will reign in speculation just yet.

  • Yellow – Total outstanding balance of margin transactions
  • Blue – A50 index
  • White – China CSI 300

Do we fade the rally?

If we look at any technical oscillator, such as an RSI or stochastic it will suggest the upside is limited and that the market is incredibly overbought. The move in the RSI is obviously a function of just how powerful and impulsive the move has been of late, but are we at a point where we think the market is simply going to roll over and decline 15%? My view is that any weakness in the next few days will likely be supported, and while there are risks a touch of the heat comes out of the move, traders will be taking the timeframe in and watching price to assess where buyers step back in.

Technicals aside, if I look at certain market internals, they are screaming euphoria – which in any other market would suggest looking very intently at one’s stop placement or even reducing bullish positioning. But China is a different vehicle altogether and when FOMO marries with the shared belief that authorities want higher asset prices we can see markets making new highs despite grossly overbought levels.

  • In order – top – China CSI 300
  • Number of companies > 20-day MA
  • Number of companies > 50-day MA
  • Number of companies > 200- day MA
  • Number of companies at 4-week high

Catalysts

Let not forget that retail participation in the Chinese markets is arguably far higher than anywhere else in the world, and somewhere north of 70% of the daily flow – so when local traders hear a message they act.

By way of catalysts, many have credited an article in China Securities Journal (from Xinhua) that detailed “support to a strong start for a bull market in A-shares will mark the beginning of new opportunities”. This is certainly positive when married with the recent relaxation of margin trading regulations. We also see monetary policy more broadly having been eased in recent times and the fact that China’s economic data has turned more positive is also a tailwind to risk appreciate –

China is hot

China is hot right now and is a market worth putting on the radar. With all talk of a tidal wave of retail participation in global equities, it seems China has firmly joined the party.

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

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Chris Weston, Head of Global Research at Pepperstone.

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Economic Data and Optimism Continues to Weigh on the Greenback. Next up, the RBA…

Earlier in the Day:

It was a busier start to the day on the economic calendar. The Kiwi Dollar and Japanese Yen were in action early this morning. Later this morning, the RBA and Aussie Dollar are also in the spotlight.

Away from the morning stats, the markets responded to U.S ISM Non-manufacturing PMI numbers from Monday.

Continued optimism over an economic recovery amidst spiking new COVID-19 cases weighed on the Greenback.

COVID-19 numbers continued to hit concerning levels, though the markets remained focus on the economic recovery and not news of renewed lockdown measures across the globe.

Looking at the latest coronavirus numbers

On Monday, the number of new coronavirus cases rose by 177,554 to 11,713,082. On Sunday, the number of new cases had risen by 156,610. The daily increase was higher than Sunday’s rise and 153,341 new cases from the previous Monday.

Germany, Italy, and Spain reported 1,876 new cases on Monday, which was up from 407 new cases on Sunday. On the previous Monday, 803 new cases had been reported. Notably, Spain reported 1,244 new cases on Monday. This was the highest since 22nd May and follows news of a lockdown within the Catalonia region.

From the U.S, the total number of cases rose by 45,706 to 3,028,861 on Monday. On Sunday, the total number of cases had increased by 47,385. On Monday, 29th June, a total of 41,940 new cases had been reported.

For the Kiwi Dollar

The NZIER Quarterly Survey of Business Survey (QSBO) showed that a net 63% of businesses expect a deterioration in general economic conditions in the 2nd quarter. In the 1st quarter, a net 67% of businesses had expected a deterioration.

  • A net 37% of businesses reported a decline in own trading activity, which was the lowest since Mar-09.
  • While this was expected as a result of lockdown measures, a net 25% of businesses also expect weaker demand in the next quarter.
  • The negative sentiment towards the quarter ahead was attributed to pre-general election uncertainty and over COVID-19.
  • News of countries reporting fresh spikes added to uncertainty over how the COVID-19 pandemic would play out.

The Kiwi Dollar moved from $ to $ upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.14% to $0.6564.

For the Japanese Yen

Household spending fell by 0.1% in May, month-on-month, partially reversing a 6.2% decline from April. Economists had forecast a 1.8% increase. Year-on-year, household spending was down by 16.2%, following an 11.1% slide in April. Economists had forecast a 12.2% tumble.

According to the Statistic Bureau,

  • Spending on clothing & footwear (-37.4%), culture & recreation (-37.2%), education (-29.2%), and housing (-24.2%) weighed heavily.
  • There were also sizeable declines in spending on fuel, light, & water charges (-8.0%), medical care (-6.5%), and food (-3.4%).
  • Spending on furniture and household utensils rose by 8.0%, year-on-year, to buck the trend.

The Japanese Yen moved from ¥107.357 to ¥107.356 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.04% to ¥107.31 against the U.S Dollar.

For the Aussie Dollar

At the time of writing, the Aussie Dollar was up by 0.06% to $0.6977, with the markets expecting an RBA hold on policy.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include German industrial production figures for May.

Following June’s PMI numbers, there will need to be a pickup in production to support the survey-based data.

Away from the economic calendar, however, expect market risk sentiment to remain the key driver. While news from China was positive on Monday, geopolitics and COVID-19 remain key risks to the current sentiment.

At the time of writing, the EUR was up by 0.10% to $1.1320.

For the Pound

It’s a quiet day ahead on the economic calendar. Housing sector figures for June and 1st quarter labor productivity numbers are due out.

Following news at the start of the week of plans to raise the threshold for stamp duty, June house price figures should have a muted impact. We can also expect 1st quarter labor productivity numbers to also be brushed aside by the Pound.

Expect market risk sentiment, COVID-19, and Brexit chatter to remain key drivers.

At the time of writing, the Pound was up by 0.10% to $1.2505.

Across the Pond

It’s a relatively quiet day ahead for the U.S Dollar. Key stats include May’s JOLTs job openings. Expect the markets to be sensitive to today’s figures. While nonfarm payrolls have impressed, the weekly jobless claims continue to raise red flags…

Away from the numbers, chatter from the U.S administration and the latest COVID-19 numbers will also draw attention.

At the time of writing, the Dollar Spot Index was down by 0.05% to 96.676.

For the Loonie

It’s a relatively quiet day ahead on the calendar. June’s Ivey PMI is due out later today.

There will be some influence on the Loonie, though geopolitics and COVID-19 will likely be key drivers.

At the time of writing, the Loonie was down by 0.01% to C$1.3541 against the U.S Dollar.

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

AUD/USD and NZD/USD Fundamental Weekly Forecast – RBA to Leave Rates Unchanged, See No Need for Negative Rates

Australian and New Zealand Dollar traders have, for the most part, shrugged off the COVID-19 clouds that dominated the press the past two weeks. Firm demand for risky assets is behind the move as investors continue to bet that the global economic recovery will not be derailed by this sudden surge in coronavirus infections.

Last week, the AUD/USD settled at .6942, up 0.0080 or +1.17% and the NZD/USD finished at .6536, up 0.0114 or +1.77%.

A number of stronger-than-expected economic reports in the United States, Australia and New Zealand have encouraged investors to maintain the bullish tone that began months ago. Looking at the Aussie and Kiwi charts, one can see that investors bent a little, but did not break the uptrend.

The price action suggests the AUD/USD and NZD/USD will continue to claw higher as long as the economic data remains positive. The profit-taking or selling pressure is likely to start if the data starts to reverse. At this time, it appears that no one expects a second-wave of coronavirus infections to inflect the same amount of pain on the global economy as it did during the first wave.

Australian State’s Cases Spike, Borders to Shut

Although traders are banking on the recovery to continue, the AUD/USD could face some headwinds if COVID-19 continues to spread in the country.

Over the weekend, “The hard-hit Australian state of Victoria recorded two deaths and its highest-ever daily increase in coronavirus cases on Monday as authorities prepare to close its border with New South Wales,” the AP reported.

Victorian Premier Daniel Andrews announced that the state border with New South Wales will be closed from late Tuesday night in an agreement between the two state premiers and Prime Minister Scott Morrison. Morrison had previously opposed states closing their borders.

It will be the first time Australia’s two most populous states have closed their border since the pandemic began.

Weekly Forecast

Last month, the Reserve Bank of Australia (RBA) kept rates on hold at its record low of 0.25 percent as Australia continues to battle with coronavirus’ impact on the economy. In our opinion, policymakers will leave rates unchanged in June and probably for the next three years.

Furthermore, previous comments indicate that the RBA sees no value in taking rates negative. Therefore, any further easing in monetary policy will have to come from quantitative easing.

Basically, investors shouldn’t expect to see a raise in the cash rate until the RBA has made progress towards full employment and inflation within the 2-3 percent target band.

As far as the AUD/USD and NZD/USD are concerned, the price action is disconnected from central bank activity. The rising currencies are being driven by global demand for higher-risk assets as investors continue to bet on a V-shaped recovery in the global economy.

The Aussie and Kiwi are not likely to pullback substantially unless a second-wave of COVID-19 forces enough massive shutdowns and restrictions to derail the current global recovery.

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

U.S Service Sector PMIs, Geopolitics, and COVID-19 Put the Dollar in Focus

Earlier in the Day:

It was a particularly quiet start to the week on the economic calendar. There were no material stats for the markets to consider through the early part of the Asian session.

A lack of stats left the markets to consider the latest COVID-19 numbers and updates from the weekend and the rising tension between the U.S and China.

Looking at the latest coronavirus numbers

On Sunday, the number of new coronavirus cases rose by 156,610 to 11,535,528. On Saturday, the number of new cases had risen by 393,825. The daily increase was lower than Saturday’s rise while up from 136,417 new cases from the previous Sunday.

Germany, Italy, and Spain reported 322 new cases on Sunday, which was down from 1,612 new cases on Saturday. On the previous Sunday, just 650 new cases had been reported.

From the U.S, the total number of cases rose by 40,401 to 2,976,171 on Sunday. On Saturday, the total number of cases had surged by 107,457. On Sunday, 28th June, a total of 35,905 new cases had been reported.

The Majors

At the time of writing, the Japanese Yen was down by 0.22% to ¥107.75 against the U.S Dollar. The Aussie Dollar was up by 0.29% to $0.6959, with the Kiwi Dollar up by 0.34% at $0.6553.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. From Germany, May’s factory orders are due out, with May retail sales and June’s Construction PMI due from Germany.

While we would expect Germany’s factory orders to provide direction, risk sentiment will likely be the key driver.

Concerns over the spike in new COVID-19 cases in the U.S could weigh on risk sentiment later in the day. Much will depend on the news wires.

At the time of writing, the EUR was up by 0.20% to $1.1270.

For the Pound

It’s a quiet day ahead on the economic calendar. June’s Construction PMI is due out later this morning.

Any influence on the Pound will likely be short-lived, however, with the Pound likely to be in the hands of Brexit.

Updates from the weekend suggested that the chances of a no-deal departure from the EU had risen sharply.

Risk sentiment will also influence. The risk-on sentiment limited the downside for the Pound early on.

At the time of writing, the Pound was down by 0.01% to $1.2482.

Across the Pond

It’s a relatively busy day ahead for the U.S Dollar. Key stats include the market’s preferred ISM Manufacturing PMI for June and the finalized Markit survey services PMI.

Expect the ISM figures to have the greatest impact on the day.  The markets will be expecting some impressive numbers…

We can expect plenty of chatter from the U.S administration, who has moved into damage control.

At the time of writing, the Dollar Spot Index was down by 0.12% to 97.051.

For the Loonie

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

While there are no stats, the BoC will release the Business Outlook Survey later in the day. Expect the results of the survey to provide the Loonie with direction upon release.

Over the course of the day, any threat of a wider pause on the easing of lockdown measures would weigh on the Loonie. There is also the rising tension between the U.S and China to also consider. It’s no longer just a trade war that the markets may be in fear of.

At the time of writing, the Loonie was down by 0.01% to C$1.3548 against the U.S Dollar.

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

The Week Ahead – COVID-19 and Geopolitics Are in Focus along with Stats and the RBA

On the Macro

It’s a quiet week ahead on the economic calendar, with just 30 stats in focus in the week ending 10th July. In the week prior, 74 stats had also been in focus.

For the Dollar:

It’s a particularly quiet week ahead on the economic data front though not without some key stats to consider.

On Monday, the markets preferred and highly influential ISM Non-Manufacturing PMI for June is due out.

As the markets monitor labor market conditions, May’s JOLTs job openings on Tuesday will also draw attention.

The focus will then shift to the weekly jobless claims on Thursday. A pause in reopening across the most populous states of the U.S will not help bring the numbers back down to palatable levels…

At the end of the week, wholesale inflation figures for June will likely have a muted impact on the markets…

The Dollar Spot Index ended the week down by 0.27% to 97.172.

For the EUR:

It’s a relatively quiet week ahead on the economic data front.

Germany is in focus throughout the week. Key stats include May’s factory orders, industrial production, and trade figures.

We would expect factory orders and industrial production to have the greatest influence. These are figures from May, however, that should limit any material impact on the EUR.

From the Eurozone, retail sales figures on Monday will likely have a muted impact on the EUR.

Consumer spending and a bounce back in service sector activity remain key to a swift economic recovery. Following last week’s member state numbers, however, there shouldn’t be too many surprises.

From the EU, economic forecasts are due out on Wednesday that will garner plenty of attention. With the recent uptick in private sector activity and bounce back in consumption, the markets will want some better forecasts…

The EUR/USD ended the week up by 0.26% to $1.1248.

For the Pound:

It’s a quiet week ahead on the economic calendar.

Key stats include June’s construction PMI, 1st quarter labor productivity numbers, and house price figures.

Don’t expect the stats to have any material influence on the Pound, however.

Brexit chatter will likely be the key driver in the week. The EU and Britain continue to fail to find common ground.

Market risk sentiment will also be key, with any jump in COVID-19 numbers Pound negative.

The GBP/USD ended the week up by 1.19% to $1.2483.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Monday, June’s Ivey PMI is due out on Monday, with June employment figures due out on Friday.

While the Ivey PMI will influence, expect the employment figures to have the final say in the week.

Mid-week, housing starts, and building permit numbers will have a muted impact on the Loonie.

At the start of the week, the BoC will release its Business Outlook Survey that will influence the Loonie. Sentiment will need to materially improve to support a more optimistic economic outlook.

Away from the calendar, COVID-19 updates and any chatter about trade tariffs will also provide direction.

The Loonie ended the week up by 1.03% to C$1.3547 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead for the Aussie Dollar.

There are no material stats due out to provide the Aussie with direction in the week. While there are no stats, however, the RBA will deliver its monetary policy decision on Tuesday.

We don’t expect any moves, which puts the focus on the RBA rate statement.

A lack of stats and the lack of an RBA move would ultimately leave the Aussie Dollar in the hands of COVID-19 and trade chatter…

The Aussie Dollar ended the week up by 1.08% to $0.6939.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic calendar.

On Tuesday, 2nd quarter business confidence figures are due, with electronic card retail sales due out on Friday.

Expect both sets of numbers to influence, though electronic card retail sales should garner more interest.

From elsewhere, updates from the U.S and the EU on COVID-19 and any chatter on trade will also influence. The last thing that the Kiwi Dollar needs is a 2nd wave…

The Kiwi Dollar ended the week up by 1.68% to $0.6531.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

Economic data is limited to May’s household spending figures and current account numbers. In a normal world, we would expect some influence from household spending figures.

At present, however, the Yen remains wedged between the Greenback and riskier assets.

Expect market risk sentiment to remain the key driver in the week.

The Japanese Yen ended the week down by 0.27% to ¥107.51 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front. Key stats include June’s inflation figures. Don’t expect too much influence from the numbers, as the global markets grapple with COVID-19 and Trump…

The Chinese Yuan ended the week up 0.17% to CNY7.0663 against the U.S Dollar.

Geo-Politics

UK Politics:

There’s still no good news on the Brexit front, which continues to leave the Pound languishing at sub-$1.30 levels.

Following the lack of progress from last week, British PM Johnson began to talk positively about a no-deal Brexit.

Talks ended 1-day early on Thursday, with significant differences remaining and scuppering any hopes of progress.

The markets are not expecting Boris Johnson to compromise, which will leave the markets and the Pound in limbo until the talks resume.

There was some gamesmanship from the EU. Angela Merkel had reportedly requested that negotiators should prepare to leave trade talks without a deal.

We expect the news wires to be active on Brexit in the week ahead. It had been on the quieter side as the markets focused on economic data.

U.S Politics:

Foreign policy with China will be in the spotlight in the week as tensions between the U.S and China spike.

News from the weekend should certainly leave the markets in a cautious mood going into the week.

Reports of the U.S sending aircraft carriers to the South China Sea as China holds drills in the region is alarming.

Last week, the U.S moved forward on legislation to hit banks doing business with China. The move came in response to China’s national security law on Hong Kong. China has warned of taking every countermeasure available should the U.S President sign the Hong Kong Autonomy Act that the Senate approved last week.

The Coronavirus:

Over the weekend, news updates of a fresh spike in new COVID-19 cases will give the markets little comfort.

China, Germany, Italy, and South Korea all reported localized clusters. From the U.S, 12 states are reportedly pausing reopening. There was a new record high number of new cases reported on Saturday.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  • Governments continue to progress towards fully opening economies and borders.

Based on the figures last week and from the weekend, points ii) and iii) in particular have been market negative.

As the threat of a 2nd wave rises, it is also unlikely to have a vaccine in the coming weeks.

This is also market negative should the number of new cases continue to rise, as it would require the need for another total lockdown in affected economies.

At the time of writing, the total number of coronavirus cases stood at 11,378,918. Monday to Saturday, the total number of new cases increased by 1,339,869. Over the same period in the previous week, the total number had risen by 1,048,069.

Monday through Saturday, the U.S reported 361,275 new cases to take the total to 2,935,770. This was up from the previous week’s 239,880. On Saturday 4th July, there were 107,457 new cases.

For Germany, Italy, and Spain, there were 6,397 new cases Monday through Saturday. This took the total to 736,462. In the previous week, there had been 6,948 cases over the same period.

The Weekly Wrap – Positive Economic Data Supported Riskier Assets in the Week

The Stats

It was a particularly busy week on the economic calendar, in the week ending 3rd July.

A total of 74 stats were monitored, following the 44 stats from the week prior.

Of the 74 stats, 45 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 4 stats were in line with forecasts in the week.

Looking at the numbers, 52 of the stats reflected an upward trend from previous figures. Of the remaining 22, 20 stats reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive week in the red. In the week ending 3rd July, the Dollar Spot Index fell by 0.27% to 97.172. In the week prior, the Dollar had fallen by 0.19%.

COVID-19 remained in focus, as economic data delivered further support to riskier assets in the week.

For the U.S, the daily COVID-19 numbers continued to spike in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 11,175,074 on Friday, rising from last Friday’s 9,884,193 total cases. Week-on-week (Saturday through Friday), the total number of cases was up by 1,290,881 on a global basis. This was higher than the previous week’s increase of 1,126,459 in new cases.

In the U.S, the total rose by 338,384 to 2,886,260. In the week prior, the total number of new cases had risen by 250,686. An upward trend was evident throughout the week once more.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 6,464 to bring total infections to 735,809. In the previous week, the total number of new cases had risen by 8,019.

Out of the U.S

It was a busy week on the economic data front.

Key stats in the week included consumer confidence, private sector PMIs, the weekly jobless claims, and June’s nonfarm payrolls.

The all-important consumer confidence and labor market stats were largely skewed to the positive.

The CB Consumer Confidence jumped from 85.9 to 98.1, with nonfarm payrolls jumping by a record 4.8m in June.

A surge in hiring in May and June led the unemployment rate back down to 11.1%.

The weekly jobless claims were disappointing, however, rising by 1.472m following a 1.482m jump in the previous week.

Following the release of the numbers, President Trump was quick to hold a press conference. The focus was on the jump in May and June nonfarm payrolls, consumer confidence, and spending.

It was expected and Trump delivered, with the President talking of records and the gains in the U.S equity markets since his election.

He also promised more for next year, as the administration looked to claw back some of Biden’s lead.

In the equity markets, the NASDAQ and S&P500 rallied by 4.62% and by 4.02% respectively. The Dow ended the week up by 3.25%.

Out of the UK

It was a relatively busy week on the economic calendar. Finalized 1st quarter GDP numbers and finalized private sector PMIs were in focus.

The stats were skewed to the negative. Downward revisions to 1st quarter GDP and business investment figures had a muted impact on the Pound, however.

In the 1st quarter, the UK economy contracted by 2.2%, revised down from 2.0%.

The markets have moved on from the 1st quarter, with a slower pace of contraction in the private sector positive.

The all-important services PMI jumped from 29.0 to 47.1, supported by the easing of lockdown measures.

While Angela Merkel sounded the alarm bells over Brexit, there was little for the markets to fret about. Risk appetite through the week added to the upside in the Pound.

In the week, the Pound rose by 1.19% to $1.2483, reversing a 0.11% fall in the previous week. The FTSE100 ended the week down by 0.03%, with a 1.33% slide on Friday delivering the loss.

Out of the Eurozone

It was another busy week economic data front.

Key stats included June private sector PMI for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone.

Consumer spending figures from France and retail sales and unemployment figures from Germany were also in focus.

Both the manufacturing sector and service sector PMIs bounced in June, providing the EUR with support.

France’s private sector led the way, with both manufacturing and service sector activity expanding.

The Eurozone’s composite rose from 31.9 to 48.5 in June.

Germany’s unemployment rate rose to 6.4%, with just a 69k increase in the number of unemployed. In May, there had been a 238k increase in unemployed.

Consumer spending also bounced back in France and Germany as member states reopened.

For the week, the EUR rose by 0.26% to $1.1248, following a 0.37% gain from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 3.63%, with the CAC40 and EuroStoxx600 gaining 1.99% and by 1.98% respectively.

Elsewhere

It was another bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 3rd July, the Aussie Dollar rose by 1.08% to $0.6939, with the Kiwi Dollar rising by 1.68% to $0.6531.

For the Aussie Dollar

It was a busy week for the Aussie Dollar on the economic data front.

Key stats included May trade and retail sales figures.

There was not much support from trade data, with the trade surplus narrowing from A$8.8bn to A$8.025bn.

At the end of the week, retail sales jumped by 16.9% in May, reversing most of a 17.7% slump from April.

Support ultimately came from better than expected economic data from China, the EU, and the U.S.

Progress towards a COVID-19 vaccine eased some of the market concerns over the recent spike in new COVID-19 cases.

For the Kiwi Dollar

It was also a relatively quiet week on the economic data front.

Key stats were limited to May building consents and June business confidence figures.

Both were Kiwi Dollar positive. Building consents surged by 35.6%, with the ANZ Business Confidence Index rising from -41.8 to -34.4.

The Kiwi Dollar also found support from the PMIs out of the EU, China, and the U.S and COVID-19 news.

For the Loonie

It was a relatively busy week on the economic calendar.

Key stats included May’s RMPI and trade data and April’s GDP figures.

The stats were skewed to the positive. The RMPI jumped by 16.4% to reverse a 13.4% slide from April. Canada’s economy contracted by 11.6% versus a forecasted 13.0% contraction. And, Canada’s trade deficit narrowed from C$4.27bn to C$0.68bn.

Positive data coupled with the positive stats from the U.S and hopes of a COVID-19 vaccine delivered the upside.

The Loonie rose by 0.27% to end the week at C$1.3547, partially reversing a 0.60% loss from the previous week.

For the Japanese Yen

It was a busy quiet week on the data front.

In the 1st half of the week, May retail sales and industrial production figures disappointed. Consumer spending continued to slide, with industrial production also seeing another hefty decline in May.

Mid-week, 2nd quarter Tankan survey figures were also skewed to the negative.

Service sector activity provided some hope, however, with the PMI rising from 26.5 to 45.0 in June.

Ultimately, however, the Yen was in the hands of market risk sentiment and COVID-19 updates. The “risk-on” sentiment in the week, left the Yen in the red, in spite of a softer Dollar.

The Japanese Yen fell by 0.27% to end the week at ¥107.51. In the week prior, the Yen had fallen by 0.33% against the U.S Dollar.

Out of China

It was a busy week on the economic data front, with June private sector PMIs in focus.

The stats were skewed to the positive, with both manufacturing and service sector activity picking up.

From the market’s preferred Caixin survey, the manufacturing PMI rose from 50.7 to 51.2. At the end of the week, the services PMI rose from 55.0 to 58.4.

In the week ending 3rd July, the Yuan ended the week up by 0.17% CNY7.0663 against the Greenback.

The CSI300 rallied by 6.78%, while the Hang Seng rose by 3.35%.

Geopolitical risk picked up in the week, with Hong Kong and China’s rule of law in focus.

NZD and AUD On The Rise

In today’s analysis we will focus on the currencies from antipodes. We will give a break to the index traders as summer holidays combined with Independence Day in the United States can result in very low volatility and overall a boring session on the global indices. Recent optimism and relatively good situation in China are definitely helping the AUD and NZD. Thanks to that, we do have very interesting setups on the pairs with those currencies.

Let’s start with the Kiwi, NZDUSD. The pair escaped from the triangle pattern with the bullish breakout off its upper line. That gave us a mid-term buy signal. Now, the pair has to confirm this sentiment by breaking the horizontal resistance on the 0.653. The sentiment here is positive.

Taking a look at the Aussie, AUDUSD, the price is still inside of the symmetric triangle pattern. Friday brings us another bullish attempt and it looks like the resistance will be finally broken. Pressure from the buyers looks serious and the chances that they will succeed are quite high.

On the AUDJPY, the breakout of the resistance already happened, so the buy signal here is already up and running. As long as the price stays above the upper line of this formation, the sentiment is positive.

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

NZD/USD Forex Technical Analysis – Needs to Hold .6483 to Sustain Upside Momentum

The New Zealand Dollar is inching higher on Friday on low holiday volume. Nonetheless, the move does constitute a follow-through to the upside, following yesterday’s strong rally. On Thursday, the Kiwi climbed against the greenback after surprisingly strong U.S. jobs numbers and a firm stock market. However, traders are a bit cautious about chasing the currency higher as another surge in U.S. coronavirus cases threatens to derail the economic recovery.

At 06:39 GMT, the NZD/USD is trading .6522, up 0.0012 or +0.18%.

Trading in the Kiwi on Friday may be subdued before the U.S. holiday, but analysts say sentiment favors more gains in the U.S. Dollar as investors turn cautious, Reuters reported.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Thursday when buyers took out the last main top at .6533. The main trend will change to down on a move through .6381.

The minor range is .6585 to .6381. Its 50% level or pivot at .6483 is controlling the near-term direction of the NZD/USD. Trading above this level is helping to generate an early upside bias on Friday.

The short-term range is .5921 to .6585. Its retracement zone at .6253 to .6175 is the major support area.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at .6522, the direction of the NZD/USD on Friday is likely to be determined by trader reaction to the minor 50% level at .6483.

Bullish Scenario

A sustained move over .6483 will indicate the presence of buyers. Taking out yesterday’s high at .6537 will indicate the buying is getting stronger. If the volume were stronger, we’d probably see an acceleration into the main top at .6585.

Bearish Scenario

A sustained move under .6483 will signal the presence of sellers. This could trigger a quick break into a minor pivot at .6461. This is followed by a series of main bottoms at .6385, .6383 and .6381.

With the U.S Markets Closed, Service PMIs Put the EUR in the Spotlight

Earlier in the Day:

It was a busier start to the day on the economic calendar on Friday. The Aussie Dollar and Japanese Yen were in action early in the day. There were also stats from China for the markets to consider.

Away from the morning stats, the markets responded to economic data from the U.S on Thursday and COVID-19 news.

Looking at the latest coronavirus numbers

On Thursday, the number of new coronavirus cases rose by 190,716 to 10,985,093. On Wednesday, the number of new cases had risen by 210,499. The daily increase was lower than Wednesday’s rise and down from 235,258 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,027 new cases on Thursday, which was down from 1,062 new cases on Wednesday. On the previous Thursday, 1,286 new cases had been reported.

From the U.S, the total number of cases rose by 48,853 to 2,828,313 on Thursday. On Wednesday, the total number of cases had risen by 51,607. On Thursday, 25th June, a total of 45,503 new cases had been reported.

For the Japanese Yen

The June Services PMI came in at 45.0 according to finalized figures, which was up from a prelim 42.3. In May, the PMI had stood at 26.5.

According to the finalized Survey,

  • An end to the state of emergency delivered much-needed support as the PMI hit a 4-month high.
  • Levels of activity and new orders saw a faster pace of decline, however, attributed to the impact of COVID-19 on the economy.
  • Employment levels declined only marginally, with 88% of firms reporting no change to employment levels.
  • Confidence improved to a 4-month high in spite of firms seeing challenges ahead.

The Japanese Yen moved from ¥107.472 to ¥107.541 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.04% to ¥107.54 against the U.S Dollar

For the Aussie Dollar

May’s retail sales figures were in focus early on. According to the ABS, retail sales jumped by 16.9%, reversing most of a 17.7% slide from April. Economists had forecast a 16.3% rise.

  • Clothing, footwear, and personal accessory retailing jumped by 129.2%.
  • Cafes, restaurants, and takeaway food services reported a jump of 30.3%
  • Food retailing increased by 7.2%, with household goods retailing up by 16.6%.
  • Department store retailing rose by 44.4%.

The Aussie Dollar moved from $0.69262 to $0.69206 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.01% to $0.6925.

Out of China

China’s Caixin Services PMI rose from 55.0 to 58.4 in June. The composite increased from 53.4 to XX, supported by an uptick in activity across both manufacturing and services.

According to the June Services Survey,

  • Business activity and new orders rose at a sharper pace in June, with the rate of expansion the quickest since 2010.
  • New business also rose at the sharpest pace since 2010, while workforce numbers continued to decline.
  • The modest decline in the workforce was attributed to voluntary leavers.
  • Optimism across services sector firms hit a 3-year high, attributed to strong demand.

The Aussie Dollar moved from $0.69229 to $0.69237 upon release of the figures

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.09% at $0.6517.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. June Service PMI numbers are due out of Italy and Spain, with finalized PMIs due out of France, Germany, and the Eurozone.

Expect the Eurozone’s Services and Composite PMIs to have the greatest influence on the day.

With the U.S markets closed in recognition of Independence Day, expect volumes to be on the lighter side.

Any chatter on the EU’s Recovery Fund and Brexit will also be an influence on the day.

At the time of writing, the EUR was up by 0.05% to $1.1245.

For the Pound

It’s a quiet day ahead on the economic calendar. June’s finalized services and composite PMIs are due out later this morning.

Barring any deviation from prelims, the stats are unlikely to have a material impact on the Pound.

Brexit and COVID-19 will remain the key drivers on the day.

At the time of writing, the Pound was down by 0.01% to $1.2467.

Across the Pond

The U.S markets are closed in recognition of Independence Day. That leaves the Greenback in the hands of market risk appetite on the day.

At the time of writing, the Dollar Spot Index was down by 0.12% to 97.199.

For the Loonie

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

With the U.S markets closed, expect volumes to be on the lighter side. Market risk sentiment will influence on the day, however.

At the time of writing, the Loonie was flat at C$1.3564 against the U.S Dollar.

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

NZD/USD Forex Technical Analysis – Trader Reaction to .6483 Sets the Tone on Thursday

The growth-sensitive New Zealand Dollar is trading higher early Thursday as the safe-haven U.S. Dollar remains on the defensive, following yesterday’s upbeat U.S. and European economic data, although gains are being limited coronavirus worries and general uncertainty ahead of the U.S. Non-Farm Payrolls report.

U.S. Non-Farm Payrolls are expected to show an increase of 3 million jobs last month. But estimates vary widely and the data comes as concerns grow about whether the U.S. economy can sustain its recovery as coronavirus infections surge and some states reimpose limits on business and personal activity.

At 06:48 GMT, the NZD/USD is trading .6499, up 0.0020 or +0.31%.

A better-than-expected labor market report should drive up demand for the higher risk currency, while dampening the safe-have appeal of the U.S. Dollar.

Traders should note that the price action could be limited due to Friday’s U.S. bank holiday. This means we may not see the true reaction to the report until trading resumes next week.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6533 will signal a resumption of the uptrend. The main trend will change to down on a trade through .6385, but we may not see any sharp downward movement until the main bottoms at .6383 and .6381 are taken out with strong volume.

The short-term range is .6585 to .6381. Its 50% level or pivot at .6483 is the key level to watch today.

The main range is .5921 to .6585. If the main trend changes to down then its retracement zone at .6253 to .6175 will become the primary downside target.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at .6499, the direction of the NZD/USD the rest of the session on Friday is likely to be determined by trader reaction to the pivot at .6483.

Bullish Scenario

A sustained move over .6483 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into .6533.

Taking out .6533 could trigger a surge into the main top at .6585. This is a potential trigger point for an acceleration to the upside with the next major targets .6758 to .6791.

Bearish Scenario

A sustained move under .6483 will signal the presence of sellers. This could trigger a break into the three main bottoms at .6385, .6383 and .6381. Taking out .6381 with conviction could trigger an acceleration into .6253 to .6175 over the near-term.

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

Nonfarm Payrolls to Put the Dollar in Focus as COVID-19 Angst Eases

Earlier in the Day:

It was a quieter start to the day on the economic calendar on Thursday. The Aussie Dollar was in action early in the day.

Away from the economic calendar, the markets responded to the positive news of progress towards a COVID-19 vaccine. The news comes as the latest COVID-19 numbers revealed yet another spike on Wednesday.

Positive economic data from the EU and the U.S from Wednesday also supported riskier assets early on. The stats continued to support a speedier economic recovery.

Looking at the latest coronavirus numbers

On Wednesday, the number of new coronavirus cases rose by 210,499 to 10,794,377. On Tuesday, the number of new cases had risen by 201,507. The daily increase was higher than Tuesday’s rise and up from 174,860 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 1,062 new cases on Wednesday, which was up from 934 new cases on Tuesday. On the previous Wednesday, 1,463 new cases had been reported.

From the U.S, the total number of cases rose by 51,607 to 2,779,460 on Wednesday. On Tuesday, the total number of cases had risen by 53,471. On Wednesday, 24th June, a total of 38,253 new cases had been reported.

For the Aussie Dollar

Australia’s trade surplus narrowed from A$8.8bn to A$8.025bn in May.

According to the ABS,

  • Goods and services credit fell by A$1,604m (4%) to A$35,742m.
    • Non-rural goods fell A$1,080m (4%), rural goods fell A$404m (10%), and non-monetary gold fell A$219m (12%).
    • Net exports of goods under merchanting remained steady a A$45m, with services credits rising A$99m (2%).
  • Goods and services debits fell A$1,799m (6%) to A$27,717m.
    • Consumption goods fell A$1,2333m (14%), intermediate and other merchandise goods fell A$821m (8%), and capital goods fell A$412m (7%).
    • Non-monetary gold imports rose by A$710m (113%), while services debits fell $43m (1%).

The Aussie Dollar moved from $0.69245 to $0.69242 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.6915.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.05% to ¥107.52 against the U.S Dollar, while the Kiwi Dollar was up by 0.19% at $0.6489.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. The Eurozone’s unemployment rate for May is due out.

We would expect the figures to have a muted impact on the majors, however, barring particularly dire numbers. Economists have forecast a rise to 7.7%, so anything above 8% would weigh on the EUR…

Outside of the stats, expect market risk sentiment towards COVID-19 and the economic outlook to remain in focus. Nonfarm payroll figures from the U.S today will have a material influence on risk sentiment across the markets.

At the time of writing, the EUR was up by 0.07% to $1.1259.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK, which leaves the Pound firmly in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was up by 0.06% to $1.2482.

Across the Pond

It’s another busy day on the U.S economic calendar. Key stats include June’s nonfarm payrolls and unemployment rate and the weekly jobless claims.

Trade data and May factory orders for May should have a muted impact on the majors on the day.

Away from the calendar, there could be some chatter from the Oval Office in response to the June stats…

At the time of writing, the Dollar Spot Index was down by 0.07% to 97.124.

For the Loonie

It’s a relatively quiet day ahead on the calendar. Trade figures for May are due out later today. We will expect some influence, as the markets look for signs of an improving trade environment.

Away from the calendar, expect crude oil prices to provide direction later in the day.

At the time of writing, the Loonie was down by 0.10% to C$1.3600 against the U.S Dollar.

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

Mid-Week Themes – Stats, Brexit, COVID-19 and Stimulus Keep the Markets Busy

It is not only the end of the month but also the end of the quarter this week.

What are the top highlights for our today’s discussion?

We’ve got to be looking at the markets that are constantly battling. There is the constant support from the likes of the FED that’s propping up the equity markets.

The U.S equity markets saw their best quarter since 1987 and the EU markets their best since 2015. Quite remarkable when you consider the current economic environment.

While governments and central banks continue to deliver support, there is a COVID-19 reality, however. The upward trend in new COVID-19 cases has persisted, leading to the pause in reopening in the U.S.

There’s good news for the EU, however, which is removing the ban on non-essential travel today. COVID-19 numbers out of the EU have also been relatively stable in spite of reopening. So, the European equity markets should be playing catch-up and outgunning the U.S majors.

For the U.S, COVID-19 remains a major economic hindrance, as the EU continues to reopen and recover from the meltdown.

An overdoing of the stimulus could cause uncontrolled inflation and government debt not seen before.

Meanwhile, what about macroeconomic data releases?

For the EU, you’ve got service sector PMI numbers due out on Friday and today’s Germany unemployment and retail sales figures. These are key.

From the U.S, we saw consumer confidence jump in June according to figures released on Tuesday.

On Thursday, nonfarm payrolls and weekly jobless claims are in focus. There must be an improvement in labor market conditions to support the view of this economic recovery.

If NFP numbers disappoint, then the markets really need to reconsider what lies ahead. ADP nonfarm employment change figures from Wednesday will give the markets a taste of what’s to come.

The FED will continue to throw money into the markets. Such moves are unsustainable, however, if labor market conditions deteriorate further.

Next week, we then have the ISM non-manufacturing PMI out of the U.S. It’s all about service sector activity. Labor market conditions need to improve, which drives consumption, which in turn drives the services sector. We should then see a pickup in the manufacturing sector activity.

The last NFP release caused a more than 50 pip move on the EUR/USD. Three months before that it was in the range from 25 to 30 pips.

What about geopolitics?

You’ve still got Brexit. There’s been some recent debate on whether it would actually be better for Britain to leave without a deal.

One thing is certain, Boris Johnson is not going to buckle to any demands from the EU. The Tory Party is majority pro-Brexit, so there’s going to be no compromises when it comes to negotiations.

Let’s not forget a no-deal outcome could be better for the British people and the economy and not a negative.

The Pound has held fairly steady when you consider the fact that the chances of a hard Brexit rise by the day.

Elsewhere, trade wars… The U.S is threatening tariffs on the EU and then there’s the U.S and China.

These are all simmering in the background and could prop up at any time when you consider Trump languishing in the polls behind Biden.

It really has been one mistake after the other for Trump. The U.S President is going to need plenty of distraction tactics and spin to have a chance of a 2nd term.

A Busy Economic Calendar, the FOMC Minutes, and COVID-19 News in Focus

Earlier in the Day:

It was another busy start to the day on the economic calendar on Wednesday. The Aussie Dollar, Kiwi Dollar, and the Japanese Yen were in action early in the day. There were also stats from China for the markets to also consider.

Away from the economic calendar, there was yet another spike in new COVID-19 cases in the U.S. In spite of the continued spread, there was no major reaction from the markets early on in the day. Fiscal and monetary policy support is expected to continue to roll in. This has continued to support the demand for riskier assets.

Looking at the latest coronavirus numbers

On Tuesday, the number of new coronavirus cases rose by 201,507 to 10,583,878. On Monday, the number of new cases had risen by 153,341. The daily increase was higher than Monday’s rise and up from 158,646 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 934 new cases on Tuesday, which was up from 803 new cases on Monday. On the previous Tuesday, 952 new cases had been reported.

From the U.S, the total number of cases rose by 53,471 to 2,727,853 on Tuesday. On Monday, the total number of cases had risen by 41,940. On Tuesday, 23rd June, a total of 34,399 new cases had been reported.

For the Japanese Yen

2nd quarter Tankan figures were in focus in the early part of the day:

  • All Big Industry CAPEX Index increased by 3.2%, following a 1.8% rise in the 1st quarter. Economists had forecast a 2.1% gain.
  • Big Manufacturing Outlook Index slid by 27%, off the back of an 11% decline in the 1st quarter. Economists had forecast a 24% tumble.
  • The Large Manufactures Index tumbled by 34%, following an 8% decline in the 1st quarter. Economists had forecast a 31% slide.
  • Large Non-Manufacturers Index slid by 17 to reverse an 8% gain from the 1st quarter. Economists had forecast an 18% decline.

The Japanese Yen moved from ¥107.980 to ¥108.056 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.19% to ¥107.73 against the U.S Dollar.

For the Aussie Dollar

The AIG Manufacturing Index increased from 41.6 to 51.5 in June.

According to the June Survey,

  • Parts of the manufacturing sector saw mild expansion for the first time since February.
  • While returning to expansion, there was no rebound to buoyant conditions.
  • The large food and beverage sectors reported the most significant improvement in June.
  • New orders were on the rise as trading restrictions eased.

The Aussie Dollar moved from $0.69063 to $0.69052 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.07% at $0.6908.

For the Kiwi Dollar

Building consents jumped by 35.6% in May, reversing a 6.5% decline from April.

The Kiwi Dollar moved from $0.64152 to $0.64167 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.12% at $0.6462.

Out of China

The Caixin Manufacturing PMI rose from 50.7 to 51.2 in June. Economists had forecast a decline to 50.5.

According to the June Survey,

  • Production increased for a 4th consecutive month in June, as the recovery continued.
  • While production increased, the rate of output growth eased in June.
  • Firms reported a rise in new order volumes as client demand firmed.
  • While total new orders expanded for the 1st time since January, new export orders continued to decline.
  • Employment remained on a downward trend, with staffing levels in decline for a 6th consecutive month.
  • Optimism amongst manufacturers improved to its strongest since February.

The Aussie Dollar moved from $0.69085 to $0.69093 upon release of the figures.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. June Manufacturing PMIs are due out of Italy and Spain, with Germany’s May retail sales and unemployment figures for June also in focus.

Finalized Manufacturing PMIs are also due out of France, Germany, and the Eurozone.

For the EUR, Germany’s figures along with Italy and the Eurozone’s Manufacturing PMIs will be the key drivers.

Outside of the stats, expect market risk sentiment towards COVID-19 and the economic outlook to remain in focus. Any further talk of fresh stimulus would provide the EUR with support.

At the time of writing, the EUR was up by 0.04% to $1.1239.

For the Pound

It’s also a relatively quiet day ahead on the economic calendar. June’s finalized manufacturing PMI is due out later today.

Barring a material deviation from prelim, however, the stats should have a limited impact on the Pound.

The focus on the day will be on any updates from Brexit talks, with COVID-19 news also likely to influence.

At the time of writing, the Pound was down by 0.10% to $1.2389.

Across the Pond

It’s a busy day on the U.S economic calendar. Key stats include June’s ADP Employment Change and ISM Manufacturing PMI.

We can expect both sets of numbers to garner plenty of interest ahead of the FOMC meeting minutes due out late in the day.

June’s finalized Markit Manufacturing PMI should have a muted impact on the Dollar and the broader markets.

As always, any chatter from Capitol Hill and updates on COVID-19 will also need monitoring.

At the time of writing, the Dollar Spot Index was down by 0.06% to 97.330.

For the Loonie

It’s a quiet day ahead on the calendar. The Canadian markets are closed in recognition of Canada Day.

That leaves the Loonie in the hands of geopolitics, COVID-19, and the weekly crude oil inventory numbers.

At the time of writing, the Loonie was up by 0.07% to C$1.3567 against the U.S Dollar.

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