NZD Falls after the New Zealand Reserve Bank Statement and Yen Boosts its Gain against the Dollar
The RBNZ left its Official Cash Rate at 1.75% but pushed out expectations of a rate hike. The Kiwi slumped 50 points to 0.6699 following the RBNZ statement. The British Pound plummeted to one-year lows against the Dollar as worries of a “no-deal” Brexit build. Brent Crude Oil prices slumped 3.05% on worries on a slowdown of Chinese demand.
Outlook: The announcement of US sanctions on Russia were in response to Russia’s nerve agent attack on a former Russian spy and his daughter in the UK. That occurred in March this year. Meantime China retaliated on its trade spat with the US, announcing its own fresh set of 25% tariffs on US$ 16 billion worth of US goods. These issues will cloud the outlook for the US Dollar.
Trading View: While the Dollar Index (USD/DXY) ended modestly lower, it was mixed overall against its peers. The Dollar slid 0.34% against the Yen to 110.92. Russia’s Rouble plunged 2.9% against the Greenback after the US announced new sanctions on Russia.
Global yields eased with the benchmark US Ten year down one basis point to 2.96%. The yield on Germany’s 10-year Bund finished flat at 0.40%. Japan’s 10-year JGB yield was unchanged at 0.10%.
GBP/USD – plummeted to close 0.52% lower to 1.2885 at the close from 1.2941 yesterday. GBP/USD traded to a near one-year low at 1.28534. The market’s bearish sentiment on Sterling is building. On Sunday, UK Trade Minister Liam Fox said that there was a 60% chance the UK could leave the EU without a trade deal. The speculative community is currently short Sterling bets (the largest total since September 2017). Sterling is trading near to one-year lows. A bit of caution down here, the risk, if anything, is north. Immediate support lies at 1.2850/60, followed by 1.2820. Immediate resistance can be found at 1.2900 and then 1.2930. Likely range today 1.2850-1.2950. Prefer to buy dips.
USD/JPY – slip-sliding away, finishes 0.35% lower to 110.93. The Bank of Japan’s Summary of Opinions revealed how divided policymakers are in terms of how to proceed with its ultraloose monetary policy. The resurfacing of trade tensions also puts a weight on the USD/JPY. Immediate support today lies at 110.80 and then 110.60. Immediate resistance can be found at 111.10, followed by 111.30. Look to trade between 110.70-111.50 with the preference to sell USD rallies.
NZD/USD – The Kiwi slumped 50 points immediately following the RBNZ Statement to 0.6699 from 0.6749 close in New York. Prior to that, NZD/USD managed modest gains against an overall lower US Dollar. While the RBNZ pushed forward its plans to hike rates which the market viewed as dovish, its statement is balanced. The New Zealand central bank said that it expected growth to pick up and that the New Zealand Dollar is very close to fair value. While there is no current rush to make any moves on interest rates, the RBNZ expect global inflation pressures to continue rising. NZD/USD has immediate support at 0.6700 and then 0.6680. Immediate resistance can be found at 0.6730 and 0.6760. Likely range today 0.6695-0.6765. Prefer to buy dips.
AUD/USD – the Aussie finished with modest gains, closing at 0.7433 from 0.7420 yesterday. Overnight high traded for AUD/USD was 0.74393. Immediate resistance is found between 0.7440/0.7450. Overnight low traded was 0.7383. Immediate support lies at 0.7400 and then 0.7380. AUD/USD looks set to continue in its recent 0.7370-0.7470 range. Just trade the range shag on this.
EUR/USD – managed to close with mild gains to 1.1614 from 1.1599 yesterday. Like the Aussie, trade was light as we progress through the northern hemisphere summer doldrums. We are in the middle of the recent 1.120-1.1720 range and no reason to see any changes from that right now. Immediate resistance lies at 1.1630 (overnight high 1.1628). The next resistance level is at 1.1660. Immediate support can be found at 1.1580 and then 1.1550. Looking to trade a likely range of 1.1580-1.1630.
USD/ZAR – The rand was steady in early trade on Wednesday, after opening at R13.33 to the dollar. The local currency was trading at R13.35 at 11:01.
On Tuesday the rand gained 12c against the dollar, on the back of a strengthening Chinese Yuan which helped China's fellow emerging market currencies strengthen.
Events and economic data releases today: Japan July Core Machinery Orders; China July CPI and PPI (Y/Y); US July Headline and Core PPI, US Weekly Jobless Claims.
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