New Zealand Lowers Interest Rates, Greece Moves Forward
Swissquote Bank Ltd | Jul 23, 2015 07:57AM ET
Forex News and Events
RBNZ: Not Done Yet
Unsurprisingly, the Reserve Bank of New Zealand cut interest rates for the second time in 6 weeks, after having raised them in early 2014. The central bank cut its official cash rate by 25bps to 3%. However, what was surprising was the relative dovish tone of the statement, as the more hawkish wording from the previous statement has been removed. However, Governor Wheeler retained an easing bias, as he said in the statement that “further depreciation is necessary given the weakness in export commodity prices”. As a result, the kiwi appreciated almost 1.70% against the US dollar and 1.30% against the Aussie.
However, we think that the recent sharp NZD appreciation will prove short-lived, as the economic outlook remains gloomy in New Zealand. Governor Wheeler said that “the growth outlook is now softer than at the time of the June Statement,” as he added that the kiwi economy is now growing at an annual rate of around 2.5%, compared to 3% a month earlier. On top of that, inflation is far below the 1% to 3% target range, and since the RBNZ expects annual CPI to be close to the mid-point in early 2016, the only way to reach such a level is to make NZD substantially weaker. We therefore anticipate the RBNZ to continue easing its monetary policy by lowering interest rates to 2.5% by the end of the year.
Greek lawmakers accepted second set of reforms
Last night, a second set of reforms has been approved by the Greek parliament. Those reforms were about changes in the Greek banking and judiciary systems. Last week, the first set of reforms included VAT and pensions system. Bailout negotiations on the €86 billion can now start, and should end by the middle of next month. Tsipras also needs to decide if early elections should follow the deal.
"We chose a difficult compromise to avert the most extreme plans by the most extreme circles in Europe,” declared the Greek PM. For the time being, in addition to the €86 billion total bailout, €50 billion should be added, coming from a Trust Fund from privatising assets that Athens transferred. We have to also count into the total plan another €7.16 billion bridging loan that covered immediately repayment to ECB and IMF arrears. In other words, Greece is receiving loans to pay off its former loans. Last but not least, Greece has also received €36 billion of EU funding for growth and new jobs. At the moment, this last amount has not been spent yet.
The EUR/USD is still trading below 1.1000. Traders are still concerned about the sustainability of the bailout plan. The pair is also driven by Fed rate expectations. The 61.8% Fibonacci retracement at 1.0843 may be targeted within the next few weeks.
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EUR/CHF - Trading In Range
Today's Key Issues Country / GMT Euro Area First Quarter Government Deficit EUR / 09:00 Jul 23 Benchmark Repurchase Rate, exp 7.50%, last 7.50% TRY / 11:00 Jul 23 Overnight Lending Rate, exp 10.75%, last 10.75% TRY / 11:00 Jul 23 Overnight Borrowing Rate, exp 7.25%, last 7.25% TRY / 11:00 Jul 22 FGV CPI IPC-S, exp 0.66%, last 0.72% BRL / 11:00 Jun Unemployment Rate, exp 6.90%, last 6.70% BRL / 12:00 Jun Chicago Fed Nat Activity Index, exp -0.05, last -0.17 USD / 12:30 May Retail Sales MoM, exp 0.60%, last -0.10% CAD / 12:30 May Retail Sales Ex Auto MoM, exp 0.80%, last -0.60% CAD / 12:30 Jul 18 Initial Jobless Claims, exp 278K, last 281K USD / 12:30 Jul 11 Continuing Claims, exp 2233K, last 2215K USD / 12:30 Jul 19 Bloomberg Consumer Comfort, last 43.2 USD / 13:45 Jul A Consumer Confidence, exp -5.8, last -5.6 EUR / 14:00 Bloomberg July Brazil Economic Survey BRL / 14:00 Jun Leading Index, exp 0.30%, last 0.70% USD / 14:00 ECB's Jens Weidmann Speaks at Conference on Capital Markets EUR / 14:15 Jul Kansas City Fed Manf. Activity, exp -5, last -9 USD / 15:00 Jul Consumer Confidence, last 99 KRW / 21:00
The Risk Today
EUR/USD EUR/USD has increased. Hourly resistance lies at 1.1278 (29/06/2015 high). Stronger resistance lies at 1.1436 (18/06/2015 high). Support can be found at 1.0660 (21/04/2015 low).The pair is setting lower highs; therefore, we remain bearish. In the longer term, the symmetrical triangle from 2010-2014 favors further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). Break to the upside would suggest a test of resistance at 1.1534 (03/02/2015 reaction high).
GBP/USD GBP/USD is consolidating. Hourly resistance is given at 1.5803 (24/06/2015 high). Support is given at the 38.2% Fibonacci retracement at 1.5409. Stronger support is given at 1.5330 (08/07/2015 low). Nonetheless, we expect the pair to decrease again within the next few days. In the longer term, the technical structure looks like a recovery bottom whose maximum upside potential is given by the strong resistance at 1.6189 (Fibo 61% entrancement).
USD/JPY USD/JPY has broken resistance at 124.45 (17/06/2015 high), but has also failed to hold above it. Stronger resistance still lies at 135.15 (14-year high). Hourly support is given by the 38.2% Fibonacci retracement at 122.04. Stronger support is given at 120.41 (08/07/2015 low). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 118.18 (16/02/2015 low).
USD/CHF USD/CHF is still in a short-term upside momentum, but the pair is consolidating lower. Hourly support can be found at 0.9151 (18/06/2015 low). The road is still wide open for the pair to challenge stronger resistance at 0.9719 (23/04/2015 high). The pair is gaining momentum to challenge this resistance. In the long-term, there is no sign to suggest the end of the current downtrend. After failure to break above 0.9448 and reinstate the bullish trend. As a result, the current weakness is seen as a counter-trend move. Key support can be found 0.8986 (30/01/2015 low).
Resistance and Support:
EUR/USD 1.14361.12781.11961.09881.08191.06601.0521 GBP/USD 1.59301.58031.57091.55961.53301.51711.5089 USD/CHF 1.01290.98630.97190.95430.92440.91510.9072 USD/JPY 135.15125.86124.45123.81120.41118.89116.66
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