FOREX: Antipodean Wrap - AUD & NZD Rise Falters As US Stocks Stall
The Asian session started off on the back foot with US stocks closing poorly even after a better than expected ISM Services PMI overnight. The lower China services PMI saw Asia remain under pressure providing headwinds for both the AUD and NZD. MNI - AU Building approvals in March were significantly weaker than expected falling 8.8% m/m with the more stable private houses component down 4.5% m/m. Bloomberg - “ANZ is forecasting a 0.2pp rise in the NZ Q1 unemployment rate to 5.3%, which would be the highest since Q4 2016, as growth in labour supply exceeds labour demand. It doesn’t think the data or the upcoming budget on May 22 will change the RBNZ monetary policy outlook and that the updated forecasts for the May 28 meeting will be more important, especially given the global environment.”
- AUD/USD - Asian range 0.6443 - 0.6470, the AUD is currently dealing around 0.6455. The AUD move higher seems to be running out of steam as risk runs into resistance. Support should be seen back towards 0.6400, a break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 92.76 - 93.05, price goes into London trading around 92.85. Price is stalling towards the resistance seen around 94.00 as risk struggles in Asia. Support seen initially back towards the 92.00 area.
- NZDUSD - Asian range 0.5944 - 0.5973, going into London trading around 0.5965. The NZD continues to hold up well and is consolidating within a 0.5875/0.6025 range. On the day dips back to 0.5900 should continue to find support.
- AUD/NZD - Asian range 1.0819 - 1.0849, the Asian session is currently trading 1.0825. Sellers have returned back towards the 1.0850 area.
Fig 1 : AUD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg
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AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.915 - High Apr 4
- PRICE: 95.860 @ 16:42 GMT Apr 04
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
USDCAD TECHS: Bearish Structure
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4308 50-day EMA
- RES 1: 1.4242 High Apr 4
- PRICE: 1.4196 @ 17:10 BST Apr 4
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD rallied Friday, but remains lower on the week after Thursday’s downleg. The move down has confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price is through a key support at 1.4151, the Feb 14 low. This signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4308, the 50-day EMA.
CANADA DATA: Unexpected Jobs Contraction Boosts Implied April BOC Cut Chances
Canadian employment unexpectedly contracted in March, falling by the most since January 2022 at -32.6k (+10.0k expected, +1.1k prior) in a sign that the trade war with the US is spilling over increasingly into the "hard" data. The unemployment rate ticked up 0.1pp to 6.7%, in line with expectations and below the November 6.9% high, though unrounded it rose from 6.55% to 6.71% - the largest increase since November.
- The drop in employment was largely due to a 62.0k drop in full-time positions (after -19.7k, the 2nd straight drop), with part-time up for the 4th consecutive month at 29.5k (after 20.8k prior) - that mix is clearly indicative of hiring uncertainty among firms.
- The monthly full-time drop was the 2nd largest since the pandemic lows in the labour market (April 2020). Goods producing jobs fell by 12k (2nd consecutive decline), while services shed 21k (wholesale/retail trade and Information, culture and recreation led losses).
- The participation rate dipped 0.1pp to 65.2%.
- Wages were soft, dropping 0.2% M/M for the first drop since November, with the Y/Y rate slipping to 3.6% from 3.8% prior. The rise in permanent employees' wages of 3.5% Y/Y was well below the 4.1% expected (4.0% prior).
- Market-implied probability of an April BOC rate cut rose to as high as 68% after the data before settling the day at around 55%. That compares to 40% prior to Wednesday's US tariffs announcement.
