Kiwi Soars, AUD Rebounds Despite Patient RBA

  • Michael Moran, Senior Currency Strategist at ACY

  • 02.02.2022 10:15 am
  • #stocks , Michael Moran is an FX veteran of 29 years and is the Senior Currency Strategist at ACY Securities. Having hung up his professional soccer boots playing for the Philippine National Football team, his FX career started in 1992 with Lloyd's Bank Group as the Chief FX Dealer. Moran's analysis of the emerging currency pairs puts him at the top of his field among his peers.

Summary: After rebounding at the beginning of the week, the Dollar eased against its rivals. US January ISM factory activity fell 1.2% from the previous month but matched median forecasts at 57.6. The Dollar Index (DXY) which measures the value of the Greenback against a basket of 6 major currencies, eased 0.21% to 96.35 (96.65 yesterday). Despite a dovish monetary policy statement from the RBA, the Australian Dollar (AUD/USD) rebounded to 0.7117 from 0.7068 yesterday. Australia’s central bank finalised their QE program at the conclusion of its meeting yesterday but remained patient with rate hikes. New Zealand’s Kiwi (NZD/USD) finished as best performing FX, soaring 0.98% to 0.6640 from 0.6567. The Euro extended its gains versus the Greenback (EUR/USD) settling 0.33% higher to 1.1267 (1.1232). A fall in German Retail Sales to -5.5%, much weaker than expectations of -1.3%, failed to impact the shared currency. In the UK, British Final Manufacturing Output soared to 57.3 in January, its fastest pace in 6 months. This boosted the British currency against the US Dollar with the GBP/USD pair climbing 0.6% to 1.3522 (1.3445). Against the Japanese Yen, the US Dollar slid 0.31% to 114.77 from 115.12. The Greenback was also lower against the Asian and Emerging Market currencies. The USD/SGD pair (Dollar-Singapore Dollar) dipped 0.20% to 1.3487 from 1.3515. Against the Thai Baht, the US Dollar (USD/THB) edged lower to 33.17 (33.27).
Equities rallied on a combination of dip buying and month end demand in choppy trade. The US S&P 500 jumped to 4,540 in late New York up 0.6% from 4,497 yesterday.
Global bond yields were steady. The US 10-year treasury rate settled at 1.80% from 1.77%. Germany’s 10-year Bund yield was last at 0.03%, up 2 basis points from 0.01%.
Data released yesterday saw Japan’s Unemployment Rate ease to 2.7% from 2.8%. Australia’s December Retail Sales slumped to -4.4% against median forecasts at -1.9%. The RBA kept its Overnight Cash Rate at 0.10%. UK Mortgage Approvals climbed to 71,000 from 68,000. Net Lending to Individuals eased to GBP 4.4 billion from GBP 4.8 billion but beat forecasts at GBP 4.0 billion. Canada’s GDP in January rose to 0.6% from a previous rise of 0.8%, beating estimates at 0.4%. US ISM Manufacturing PMI eased to 57.6 from 58.7 but higher than forecasts at 57.4. US JOLTS Job Openings rose to 10.93 million from an upwardly revised 10.78 million, beating forecasts at 10.35 million. US Construction Spending eased to 0.2% from 0.6%, and expectations at 0.7%.
Just now, New Zealand’s Employment Change (q/q) eased to 0.1% from 2.0%, and lower than estimates at 0.4%. New Zealand’s Unemployment Rate improved to 3.2% from 3.4%.

  • NZD/USD – the Kiwi finished as best performing major, up 0.98% to 0.6640 from 0.6567 yesterday. New Zealand’s Employment report just out, was mixed and did not move the NZD/USD pair. Overnight the Kiwi soared to a high at 0.6641.

(Source: Finlogix.com)

  • AUD/USD – Month-end saw the weak shorts scramble to cover with the Battler jumping 0.72% to 0.7117 in late New York. Yesterday the AUD/USD pair opened at 0.7068. A more patient than expected RBA failed to slow short covering.
  • EUR/USD – the shared currency extended its gains versus the Greenback despite a fall in Germany’s Retail Sales. The Euro settled at 1.1267, up 0.33% from 1.1232 yesterday. Overnight the EUR/USD pair traded to a high at 1.1279 before easing at the NY close.
  • GBP/USD – Sterling also benefitted from the broad-based US Dollar weakness, finishing at 1.3522 from 1.3445 yesterday. UK economic data released yesterday was mostly upbeat and supported the British currency. Overnight high traded for GBP/USD was at 1.3522.

On the Lookout: In the countdown to Friday’s huge US Payrolls report, the first for 2022, today’s economic calendar is light. In Asia, Chinese markets are off celebrating their New Year of the Tiger.
Japan kicks off with its Annual Monetary Base report (f/c 8.5% from 8.3% - ACY Finlogix). There are no other data releases out of Australasia. Europe starts off with its Eurozone January Preliminary CPI report (y/y f/c 4.4% from 5.0%), Eurozone January Core CPI (y/y f/c 1.9% from 2.6%) – ACY Finlogix.
Italy releases its January Preliminary CPI (y/y f/c 3.8% from 3.9%) – ACY Finlogix. The US releases its ADP Private Employment Change for January (f/c 207,000 from a previous 807,000 – ACY Finlogix). That’s a big drop which is expected, so be on the lookout for surprises and revisions. Canada rounds up the day’s reports with its December Building Permits (m/m f/c -1.5% from 6.8%) – ACY Finlogix.

Trading Perspective: The Australian Dollar led the currencies higher against the US Dollar after falling to 18-month lows. Australia’s RBA left rates unchanged and ended their QE program as expected. The RBA however did not see rising inflation as an immediate problem. The Greenback was mostly lower against its rivals following mixed rhetoric from Fed officials. St Louis Fed President James Bullard said that he would prefer to delay a rate hike to May, although supporting a hike in March. This enabled Wall Street stocks to rebound with the DOW up 0.72% to 35,363 (35,030).
Much of the Dollar’s drop was mostly the result of traders paring their speculative long bets ahead of Friday’s US Payrolls report. Today’s data releases feature the US ADP Private Employment Change for January, which is the first for 2022. Expectations are for a lower number which could see further Greenback weakness. Any losses though would be limited.

  • AUD/USD – the Aussie once again frustrated the bears, as shorts scrambled for cover, lifting the Aussie 0.72% higher to 0.7117 (0.7068 yesterday). Overnight high traded was at 0.7119. This put’s today’s immediate resistance at 0.7120. The next resistance level lies at 0.7150, followed by 0.7180 and 0.7210. On the downside, immediate support can be found at 0.7090 and 0.7060. The Battler’s rebound has been impressive from last week’s low of 0.6967. For today though, the topside at 0.7120-50 resistance should hold. Likely range 0.7080-0.7130.
  • EUR/USD – the shared currency has had a good run higher against the broadly based weaker Greenback. Overnight the EUR/USD pair traded to a high at 1.1279 before easing modestly to its close at 1.1267. Yesterday, the Euro opened at 1.1232. Immediate resistance for today lies at 1.1280 followed by 1.1310. On the downside, immediate support lies at 1.1250, 1.1220 and 1.1180. Look for the Euro to consolidate its gains in a likely range today between 1.1235-1.1285. Looking to sell rallies.
  • GBP/USD – Sterling also benefitted from an overly weaker US Dollar, finishing at 1.3522 from 1.3445. The British Pound rose to a high in early Asia at 1.3532 before easing to its current 1.3522. Immediate resistance for the GBP/USD pair today lies at 1.3540 followed by 1.3570. Immediate support can be found at 1.3500, 1.3470 and 1.3440. Look for Sterling to consolidate in choppy trade, likely between 1.3450-1.3550. Prefer to sell rallies to 1.3550.
  • NZD/USD – The Kiwi has maintained its strength in early Asia, settling near its overnight and intraday high at 0.6641. NZD/USD currently sits at 0.6635. On the day, immediate resistance lies at 0.6650 followed by 0.6680 (strong). The next resistance level is found at 0.6710. Immediate support for today lies at 0.6610 followed by 0.6580 and 0.6550. Look for the NZD/USD pair to consolidate in a likely, albeit choppy range between 0.6585-0.6645 today. Preference is to sell rallies, shoot the Bird down.

Expect more choppy trade ahead, stay nimble and open. Happy Wednesday all.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

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