NZD: NZD Falls On Tariffs Headlines, Breaks Back Below 0.5600
- The NZD/USD closed Friday 0.02% lower at 0.5634, and marked the fifth straight session of selling. It was a rather quiet session on Friday, however over the weekend Trump announced tariffs on Canada, Mexico & China which has now see most G10 currencies open much lower, with the NZD trading -0.76% to 0.5591, with only the JPY trading higher.
- Focus today will be largely on any further Tariff headlines, China still remains out for Lunar New Year today although Hong Kong returns.
- The kiwi has broken back below the 0.5600 while technical indicators are now turning bearish again with the MACD printing red bars, while the RSI indicator is now at 38. Initial support is now the YTD lows of 0.5545 (Jan 12). Resistance is 0.5720-25 area (50-day EMA/ Jan highs)
- The NZ-US 2yr swap rose 4bps on Friday to -73.5bps vs the Jan highs of -66bps.
- There is little change to RBNZ dated-OIS with the market pricing in a 97% chance of a 50bps cut at next months meeting, however rate cut pricing firmed further out the curve with cumulative 136bps priced through to November, up 13bps.
- No large nearby strikes Monday, Upcoming notable strikes: 0.5525 (NZD680m Feb. 6), 0.5395 (NZD471.2m Feb. 6), 0.5700 (NZD379.1m Feb. 5)
- There isn't much on the calendar today, with focus turning to building permits on Tuesday and Employment data on Wednesday
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USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
US TSYS: Near Late Friday Lows
- Treasury futures looked to finish near late session lows Friday, early support evaporating after the December manufacturing ISM survey beat expectations, but still pointed to soft if improving sectoral dynamics. The headline reading of 49.3 was an improvement from 48.4 prior and a 9-month high, besting the survey expectation of 48.4.
- Tsy curves bear steepened briefly before retreating mildly flatter in the second half. In turn, projected rate cuts through mid-2025 look steady to lower vs. this morning's levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.2bp (-14.4bp), May'25 -17.8bp (-19.5bp), Jun'25 -26.5bp (-28.2bp).
- Focus on next week: economic data and Treasury supply has been moved forward to accommodate next Thursday's "day of mourning" to honor President Carter. The Federal holiday sees most markets closed, the exception so far is CME rates that will operate on a shortened session.
- Next Thursday's weekly jobless and continuing claims will be released on Wednesday according to the Dept of Labor site LINK
