OIL: Crude Continues Rally As Trump To Add Penalty To India Tariffs

The NZD/USD had a range overnight of 0.6057 - 0.6099, Asia is trading around 0.6095. The pair is trying to break through its recent highs and build momentum for a potential look back towards the 0.6400/0.6500 area. The relentless pressure on the USD is providing a tailwind and dips towards 0.6000 should continue to see demand.

• Q2 NZIER Business Confidence Firms, But Lack Of Demand Cited : "A net 27 percent of firms expect an improvement in general economic conditions over the coming months on a seasonally adjusted basis, which was a further lift from the net 23 percent in the March quarter."
• It added: "Although the sharp interest rate cuts since August last year have boosted confidence, the effects of lower interest rates remain slow to flow through to a lift in real activity. With demand remaining soft, firms continue to be cautious about hiring. A net 12 percent of firms reduced staff numbers in the June quarter, although a net 4 percent expect to hire in the next quarter."
• A huge bounce from sub 0.5900 and the NZD has now established a foothold above 0.6000, with the USD breaking lower the NZD/USD looks to be building for a potential break higher of its own.  A clear break of 0.6100 could provide the momentum to begin a larger move higher, initially targeting the 0.6400/0.6500 area.
• CFTC Data shows Asset Managers have cut their shorts and are now beginning to build a long in NZD +12195, the Leveraged community maintained their short that had just been added to -11981.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD404m July 1), 0.5800(649m July2)
• Data/Event : Filled Jobs, ANZ Activity Outlook & Business Confidence

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The AUD/USD had a range overnight of 0.6523 - 0.6583, Asia is trading around 0.6580. The AUD/USD found demand back towards the 0.6520 area overnight and then accelerated higher through its multiple tops around 0.6550 as the USD took another leg lower into month-end. The market will be looking for some follow through of this move signaling the potential start of a bigger move higher. CFTC data showed both Asset managers and Leveraged funds increased their AUD shorts last week most likely in the crosses. Should this break gain momentum some of these shorts could be challenged.

• (Bloomberg) - "Australian home prices climbed a fifth straight month, fueled by the Reserve Bank’s two interest-rate cuts this year and expectations of more to come."
• (Bloomberg) - “Australia started a A$2.3 billion program to encourage households to buy batteries in an effort to absorb excess renewable energy and curb price swings.”
• The AUD/USD is breaking through the top of its recent range as the pressure on the USD increases.
• The AUD needs a sustained break above 0.6550/0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn back to 0.6900/0.7000.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6560(AUD874m). Upcoming Close Strikes : 0.6750(AUD1.27b July 2), 0.6600(AUD2.55bm July4).
• CFTC Data shows Asset managers increasing their shorts -36967, the Leveraged community has also added to their shorts -22963.
• Data/Event: Melbourne Institute Inflation, Private Sector Credit 

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The Q2 NZIER business confidence survey showed improvement, but underlying activity remained weak. See this link for more details. 

• NZIER noted: "A net 27 percent of firms expect an improvement in general economic conditions over the coming months on a seasonally adjusted basis, which was a further lift from the net 23 percent in the March quarter."
• It added: "Although the sharp interest rate cuts since August last year have boosted confidence, the effects of lower interest rates remain slow to flow through to a lift in real activity. With demand remaining soft, firms continue to be cautious about hiring. A net 12 percent of firms reduced staff numbers in the June quarter, although a net 4 percent expect to hire in the next quarter."
• On inflation/costs: "Cost and pricing indicators suggest an easing in inflation pressures in the June quarter. The easing of capacity pressures is reflected in the continued dominance of firms reporting a lack of sales as the primary constraint on their business, as opposed to those reporting finding labour as the primary constraint."