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Wed, May 11 2016, 06:01 GMT Sources: Reuters
The New Zealand dollar got a leg up on Wednesday after the Reserve Bank of New Zealand wrong-footed some investors by taking no new steps to curb a hot housing market, while the Australian dollar struggled with sliding iron ore prices.
The New Zealand dollar was squeezed higher to US$0.6810, having gained a full cent from a six-week low touched on Tuesday. Its next big resistance level is US$0.6891, the 23.6 per cent retracement of the January-April move.
In its six-monthly financial stability report, the RBNZ said it was increasingly concerned about the country’s overheated housing market, but it stopped short of taking measures to tighten lending, forcing kiwi bears to the exit.
“While the report maintained a dovish outlook, there were no new policy measures included in the statement,” said Stephen Innes, a senior trader at FX firm OANDA Australia and Asia Pacific.
“Markets had been looking for any changes to macro-prudential policy to counter house price inflation across the country.”
The kiwi rallied across the board, with the euro down to NZ$1.6746, from a three-month peak of NZ$1.6929 touched on Tuesday.
It was a clear outperformer against its Aussie neighbor which dropped nearly 1 per cent to NZ$1.0806.
There was not much love anywhere for the Australian dollar. It dipped to US$0.7351, from US$0.7365 early, pulling closer to a two-month trough of 73 US cents touched on Tuesday.
Another slide in prices of iron ore, Australia’s top export earner and heavy yen buying weighed on sentiment for the commodity-currency.
The Aussie has tumbled around 5 cents in three weeks, largely after the Reserve Bank of Australia cut rates for the first time in a year to combat the risk of deflation.
“Economic growth is going to be slower, inflation will stay low, and the reality is that the Australian central bank will be dragged into moderate further easing over the next six to 12 months,” said Rob Mead, head of portfolio management at Pimco Australia. “That’s good for bond prices.”
Markets are fully priced for another easing to a record low of 1.5 per cent late this year and imply a small chance of a follow-up move by December.
New Zealand government bonds eased, sending yields as much as 5 basis points higher on the long-end.
Australian government bond futures ran into profit taking after recent gains. The three-year bond contract lost 2 ticks to 98.420, having touched a record peak on Tuesday. The 10-year contract eased half a tick to 97.7000, while the 20-year contract fell 2.5 ticks to 97.0600.
The two-year cash bond yield edged up to 1.6 per cent, from an all-time low of 1.5 per cent touched last week. It was as high as 2.1 per cent late April.
The NZD/USD pair on daily chart has formed a bearish reversal pattern, three black crows, indicating weakness in the established up-trend and potential emergence of a near-term down-trend.
This support break-point now seems to act as immediate resistance for the pair on the upside.
Last week, the yen fell to its lowest level in three weeks against the dollar on Friday amid speculation that the Bank of Japan could step up monetary easing measures at its upcoming policy review.
On the downside, a follow-up selling pressure below Friday’s lows support near 0.6835-30 is likely to accelerate the fall towards its next major support near 0.6780-70 confluence region, comprising of 50-day and 38.2% Fibonacci retracement level.
The Australian and New Zealand dollars moved lower against their U.S. counterpart on Monday, as declining oil prices weighed on the commodity currencies, although sentiment on the greenback remained fragile after Friday’s downbeat U.S. data.
Oil prices plummeted Iran decided not to attend this weekend’s meeting in Qatar to discuss a potential production freeze.
Iran’s oil minister Bijan Zanganeh said on Saturday that a production freeze will not help the country benefit from the lifting of international sanctions.
In response, Saudi Arabia vowed not to freeze production unless other major producers did the same.
The greenback remained under pressure after reports showing that U.S. industrial production fell more than expected in March and consumer sentiment deteriorated slightly this month.
The reports underlined the view that the Federal Reserve is likely to stick to a cautious approach on future interest rates increases.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 94.72.
The Kiwi reversed losses and now peeks into the green zone, with the bulls striving hard to take out upbeat NZ CPI-induced daily tops as the ongoing weakness surrounding the oil prices continue to cap the upside in the prices. Oil prices came under heavy selling pressure after a failure to reach a deal on output freeze by major oil producers at their meeting in Doha on Sunday dampened the market sentiment.
Earlier on the day, the NZD/USD pair filled in the bearish opening gap led by fresh collapse in the black gold, as markets cheered upbeat CPI figures from the OZ economy. New Zealand’s CPI rose 0.2% in the January-March period, coming in stronger than the median forecast of zero change and much higher than the 0.5% decline seen in the previous quarter.
Markets will continue to track the sentiment around the oil and stocks market amid a lack of fresh fundamental triggers lined up for release later today.
The NZD/USD pair trades -0.14% lower at 0.6889, retreating slightly from fresh session lows struck art 0.6883 in the last hour. The Kiwi is seen consolidating its recovery from 0.6835 region below 0.69 barrier, and keeps losses amid a broadly weaker greenback and falling oil prices. The Chinese markets on a holiday, traders lack incentives, which also weigh on the Antipodean. China is New Zealand’s biggest trading partner.
Focus U.S Data.
Markets now await the US factories and labor market conditions data lined up for release later today, while Tuesday’s GDT price index will also have major influence on the Kiwi.
The NZD/USD pair trades -0.17% lower at 0.6900, having posted fresh session lows at 0.6890 last hour. The Kiwi extended its choppy trend this session as the prices remained under pressure on worsening risk sentiment in the markets led by the Japanese stocks meltdown, while the losses remained in check as the Chinese PMIs surprised upside and offered some respite to the NZD bulls. China is New Zealand’s top trading partner.
Focus U.S NFP Data.
Attention now remains on the US labour market report due in the NA session, while the sentiment around the oil and stock markets will be closely monitored, in the meantime.
The NZD/USD pair trades -0.43% lower at fresh session lows of 0.6891, having met fresh supply near 0.6925 region in early trades. The Kiwi witnessed some heavy selling over the last hours mainly driven by tumbling commodities’ prices, particularly oil and copper prices, which weighed on the resource currency. Meanwhile, the US oil is down -1.25%, Brent slides -0.90%, while the copper prices shed 0.55%, USD index advances 0.23% to 95 barrier, recovering from 94.56 – Wednesday’s low.
Downbeat NZ business confidence data (Actual: 3.2 vs. 7.1 previous) also added to bearish pressure on the bird. In the day ahead, markets now look forward to the US unemployment claims ahead of Friday’s payrolls data.