|Market Overview Day 10- Level 2 NZ lockdown.|
Worldwide coronavirus cases surpasses 5,500,000
Quiet start to the week with national holidays in both the US (Memorial Day) and the UK (May Day Bank holiday) with currencies trading in narrow ranges.
With little in the way of data releases over the week attention will focus on the gradual reopening of US and European economies and concern over the rising tensions between China/US which appears to be heading towards a full scale trade war.
Over the weekend, China condemned the U.S. adding 33 Chinese entities to a trade blacklist, a move that risks potential retaliation from Beijing as the relationship between the world’s two-biggest economies deteriorates further.
The renewal of protests in Hong Kong also bought comments from China’s Foreign Minister Wang Yi , who on Sunday warned U.S. politicians were pushing relations to a “new Cold War,” as American politicians condemned Beijing’s move to impose a national security law on Hong Kong-look for Hong Kong to become the catalyst for more escalation of Sino/US tensions.
Also in this mix closer to home, are the tariffs that China is looking to impose on Australian barley exports and curtailing of beef imports as a precursor to further imposts if Australia continues promoting the call for an independent investigation into the origins of the coronavirus outbreak. Any escalation of such moves would have serious implications for the Australian recovery and further pressure the AUD.
A blowback to the New Zealand economy would be detrimental to NZD levels. • Global equity markets are higher, with optimism on economies reopening outweighing current US-China tensions
• German Ifo business confidence rebounded in May, the headline measures beating expectations
• NZ April trade balance shows surplus of $1267m, largest surplus on record ,due to slump in imports. (expected 1235m NZD )
• Head of the Central Bank of France & ECB Member Villeroy , signalled further potential easing, saying the ECB “will very probably need to go even further” Major Announcements last week: US Bank Holiday Monday Australian Retail Sales for April down -17.9% US Unemployment stabalises NZ Retail Sales down -0.7% in April UK Retail Sales down 18% in April NZ Trade Balance prints at a surplus of 1.267B for April given a sharp fall in imported goods
NZD/USD Click here for NZDUSD charts The New Zealand dollar (NZD) continues to trade within a 0.5925-0.6170 band with initial support at the 0.6000 level. Support remains firm above the 0.6000 level as the economy gradually reopens and the global perception that we have Covid-19 under control remains. However, once the wage subsidies expire and unemployment data starts to tick higher, the NZD should struggle to hold levels above the 0.6100 level with any break of the 0.5925 mark targeting a pull back to the 0.5850 level. Current Level Support Resistance Last week’s range NZD/USD 0.6104 0.6000 0.6170 0.5935- 0.6155 Back to the top
NZD/AUD (AUD/NZD) Click here for NZDAUD charts The NZD/AUD cross continues to hold within the 0.9372-0.9325 range over the last week and looks to be consolidating around the low 0.9300’s region. We favour the NZD on this cross, as trade tensions between Australia and China continue to ramp-up , the NZD is not immune from any major AUD fallout but should hold ground on the cross if AUD offshore selling emerges. Current Level Support Resistance Last week’s range NZD/AUD 0.9322 0.9233 0.9389 0.9236- 0.9373 AUD/NZD 1.0719 1.0650 1.0830 1.0668- 1.0827 Back to the top
NZD/GBP (GBP/NZD) Click here for NZDGBP charts The GBP has weakened against the NZD with the Kiwi rising from 0.4900 to 0.5028 over the last week as the UK response to the economy reopening continues to be muddled. The NZD/GBP cross is now around the 0.4995 level and we look for further gains back into the 0.5005/30 region over the next few days. Any move above 0.5000 should be seen as good buying levels for GBP. Current Level Support Resistance Last week’s range NZD/GBP 0.5002 0.4914 0.5030 0.4891- 0.5029 GBP/NZD 1.9992 1.9880 2.0350 1.9884- 2.0444 Back to the top
NZD/EURO (EURO/NZD) Click here for NZDEUR charts After making a low of 0.5475 early last week the NZD clawed higher to 0.5607, but over the last few days has flatlined on the 0.5595 level looking for direction. Given the comments from the French Central Bank head and ECB member Villeroy, last night , more EUR easing is to come so look for the NZD to hold ground on this cross with potential to move toward the
0.5650 mark over the next few days. Current Level Support Resistance Last week’s range NZD/EURO 0.5599 0.5480 0.5680 0.5489- 0.5606 EURO/NZD 1.7860 1.7600 1.8260 1.7836- 1.8215 Back to the top
AUD/USD Click here for AUDUSD charts After a solid start last week with a move from 0.6410 to a high of 0.6616 the AUD looks to have run out of steam, trading in a narrow 0.6510-0.6555 band over the last 3 days. With tensions rising between Australia’s largest trading partner China and continued strong words from China on tariffs for Australian imports the AUD will struggle to make headway over the 0.6600 level. Australia’s Prime Minister Scott Morrison earlier today unveiled his ‘JobMaker’ plan that is supposed to help the country’s economy get out of critical care, return it to growth, and slash unemployment – which has reached almost 10%….The markets showed little response to the plan and will await more detail. Risk on this currency is now on the downside, as any acceleration of Chinese tariffs (or rhetoric of the same) will bring back selling pressure for the AUD….A break of 0.6500 would target 0.6480 then 0.6410. Current Level Support Resistance Last week’s range AUD/USD 0.6546 0.6400 0.6615 0.6410- 0.6613 Back to the top
AUD/GBP (GBP/AUD) Click here for AUDGBP charts The AUD has outperformed the GBP on this cross , climbing from 0.5303 early last week to a high of 0.5398 late last week…It has eased to 0.5370 currently on the China tariff news, but given the confusion that continues around the UK virus response we favour further AUD strength on this cross over the week….A break through the 0.5400 resistance level would target 0.0.5530 but given the trade concerns this level is unlikely to be seen this week. UK economic data continues to be weak, with potential for large job layoffs and speculation that the BoE will turn to setting negative interest rates to help stimulate the economy keeping the lid on any potential for GBP rallies. Current Level Support Resistance Last week’s range AUD/GBP 0.5364 0.5350 0.5400 0.5288- 0.5396 GBP/AUD 1.8642 1.8530 1.8700 1.8529- 1.8908 Back to the top
AUD/EURO (EURO/AUD) Click here for AUDEUR charts The AUD has had a slow steady climb against the EUR over the last week from 0.5925 to 0.6023- currently sitting around 0.6018 with concerns over the effect of further Chinese tariffs on Aussie exports offset by news that the ECB will look at easing rates further to stimulate the EU region’s growth….upside resistance is around 0.6050 February’s high , which if broken would target a move to the 0.6105 level. Short term the AUD could come under pressure from trade tariffs, but medium term the AUD is favoured on this cross. Current Level Support Resistance Last week’s range AUD/EURO 0.6005 0.5920 0.6045 0.5929- 0.6018 EURO/AUD 1.6652 1.6550 1.6900 1.6615- 1.6865 Back to the top