NZD: Budget Day
Participants flocked into safe havens Wednesday, shying away from high-beta currencies such as the kiwi dollar. Growth concerns continued to simmer as global inflationary pressures call for tighter monetary policy, while China's keeps fighting multiple local flare-ups of COVID-19. NZD/USD sales accelerated in NY hours as U.S. equities had their worst day in nearly two years.
- NZD/USD implied volatilities jumped on Wednesday, with 1-week tenor extending gains this morning, ahead of next Wednesday's RBNZ monetary policy meeting.
- Spot NZD/USD trades at $0.6302, a touch higher on the day. From a technical perspective, gains above May 17/11 highs of $0.6376/80 are needed to signal the resumption of recovery from recent cycle lows. The next layer of resistance is at $0.6568, the high print of May 5. Key near-term support is located around $0.6232, which represents the 61.8% retracement of the 2020 - 2021 rally.
- FinMin Robertson is preparing to deliver Budget 2022 at 14:00 NZST/03:00 BST. It will be a difficult balancing act, as the Labour government intends to make good on its long-term spending pledges without adding too much fuel to the overheated economy. At the same time, Labour is under growing political pressure to address the costs of living crisis, an easy talking point for the Nationals.
- Reminder that New Zealand's quarterly PPI data will hit the wires shortly. Australia's monthly jobs market report, due later in the day, will be eyed in case it generates any trans-Tasman spillover.
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NZD: Kiwi Holds Steady After Orr Reaffirms Anti-Inflation Bias
Monday saw NZD/USD retreat, with liquidity thinned out by market holidays in a number of countries, including New Zealand. The rate came under pressure following the release of China's activity data, which showed an above-forecast contraction in retail sales and an unexpected bounce in the unemployment rate, with some analysts questioning the reliability of better than anticipated GDP figures amid intensifying headwinds from the outbreak of Omicron.
- RBNZ Gov Orr said that New Zealand's central bank has been "acting reasonably aggressively to tighten monetary conditions" and "provided strong forward guidance that we expect to be doing more rate rises over coming quarters." He spoke after the RBNZ raised the OCR by 50bp last week, the largest amount of tightening in 22 years.
- Orr conceded that the central bank is "not in a great place now "when it comes to fighting inflation and noted that "at the moment, the balance of risks (...) is very much weighted to constraining those inflation expectations in the medium term." He said that policymakers "must retain an anti-inflation bias in everything we do."
- Separately, FinMin Robertson told RNZ that he expected upcoming data to show an acceleration in consumer price growth. He refused to speculate on specific numbers, but warned that inflation has not peaked yet.
- New Zealand's PSI will hit the wires at the bottom of the hour, before focus turns to the much awaited quarterly CPI report, due Thursday.
- NZD/USD trades at $0.6734, only marginally on the day. Bulls need a clearance of Apr 13 high of $0.6902 before setting their sights on Apr 5 high of $0.7034. Bears would be pleased by a retreat under yesterday's low of $0.6715, followed by Feb 24 low of $0.6631.
AUSSIE 10-YEAR TECHS: (M2) Bounces Off Cycle Low
- RES 3: 97.870 - High Mar 3
- RES 2: 97.455 - High Mar 18
- RES 1: 97.185 - High Apr 5
- PRICE: 96.915 @ 13:08 BST Apr 18
- SUP 1: 96.821 - 2.0% Lower Bollinger Band
- SUP 2: 96.795 - Low Jul 3 2015 (cont)
- SUP 3: 96.570 - 0.5% 10-dma envelope
Aussie 10y futures have bounced ahead of cycle lows, but rallies look corrective for now, with the downside bias still present in Aussie fixed income markets. The move lower exposes next support posted at the 2.0% Lower Bollinger Band at 96.860, ahead of a stronger area of support at the 0.5% 10-dma envelope - which crosses at 96.570 currently. Initial resistance is at a recent high of 97.185 on Apr 5.
AUSSIE 3-YEAR TECHS: (M2) Corrective Rally Stalls
- RES 3: 98.350 - High Mar 3
- RES 2: 97.975 - High Mar 16
- RES 1: 97.530 - High MAr 31
- PRICE: 97.405 @ 13:06 BST Apr 18
- SUP 1: 97.185 - Low Apr 6
- SUP 2: 97.030 - Low Sep 2014
- SUP 3: 96.846 - 0.5% 10-dma envelope
Aussie 3yr futures bounced Wednesday, but rallies remain corrective for now. The contract traded to a fresh cycle low on Apr 7, to once again confirm an extension of the downtrend and the bearish price sequence of lower lows and lower highs. This keeps the focus pointed lower for now and attention is on 97.030 - the Sep 2014 low. Moving average studies remain in bear mode highlighting the current trend direction. Key short-term resistance is at 97.530, the Mar 31 high.
