RBNZ Suspends Rate Hikes, NZD Slides
| Jul 24, 2014 03:20AM ET
Market Brief
As widely expected, the RBNZ increased its OCR by 25 basis points to 3.50% with less hawkish accompanying statement. NZD/USD stepped down by more than 130 pips amid the RBNZ Governor Stevens signaled pause in interest rate hikes given the “unjustified and unsustainable” level of kiwi and moderate inflation. The NZ trade surplus narrowed lower than expected in June; the decline in imports (from 4.32bn to NZD 3.95bn) partially offset slower advance in exports (from 4.60bn to NZD 4.20bn). NZD/USD slid down to 0.8572 for the first time since June 12th, bearish trend intensified as 50 and 100-dma (0.8652 and 0.8627 respectively) were broken on the downside. The next key support stands at year-to-date uptrend channel base (currently at 0.8542). Option barriers are placed at 0.8600/30 area for today expiry. AUD/NZD spiked to 1.1016, slightly lower than 1.1040 (Fibo 50% on Nov’13 – Jan’14 drop). Given the overbought conditions (RSI at 71% and upper BB at a distant 1.0915) we expect some downside correction at the current levels.
In Japan, the trade deficit narrowed from 909.0bn yen down to 822.2bn yen, missing the consensus at 642.9bn yen. USD/JPY advanced to 101.59, yet failed to push the levels higher. Offers are solid pre-102.00/05 (optionality / 200-dma) stops are mixed on the upside. EUR/JPY extends losses to136.39, the bias is on the downside. Option barriers abound between 135.00/137.50 for the day. The key support zone is placed at 136.00/23 (March-July downtrend channel bottom / 2014 low).
EUR/USD traded ranged in Asia yet sold-off sharply to 1.3438 as European traders walked in. Trend and momentum indicators are bearish, the July preliminary PMI numbers are due today, good numbers should trigger some correction given the oversold conditions (RSI at 27% and 30-day lower BB at 1.3465), however we do not expect significant market reaction. The bias remains on the downside. The key support stands at 1.3296 (November 7th 2013 low). On a similar patter, EUR/GBP sold-off below 0.79000. A daily close under 0.78798 will send the MACD back in the red zone, while on the upside, offers pre-21 dma (0.79403) should limit the rallies.
In the UK, the Cable extended downside correction to 1.7023 while the BoE Governor Carney stated that the BoE rate should “start to rise in order to achieve the inflation target. But the MPC has no pre-set course and the timing of any increases in interest rates will be determined by the data.” The downside correction in GBP/USD deepens steadily, with decent option related offers waiting at 1.7000/25 zone for today expiry. The pair remains comfortably in its year-to-date uptrend channel (1.6888/1.7362). The next support zone is seen at 1.6923/64 (June 18th low / 50-dma).
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Released yesterday, the Canadian retail sales grew 0.7% in month to June (vs. 0.6% expected and 1.1% last), the retail sales ex-autos advanced at the pace of 0.1% m/m (vs. 0.3% exp. & 0.7% last). USD/CAD retreated to 1.7011 post-data yet failed to clear bids at 1.0700. With fading bullish trend, the pair trades ranged between 1.0698/1.0759 (21-dma / March-July declining top). A breakout is needed to asses fresh direction.
Today, the focus is on French, German and Euro-zone July (Prelim) Manufacturing, Services and Composite PMIs, Spanish 2Q Unemployment Rate, Swedish June Unemployment Rate and PPI m/m & y/y, Italian May Retail Sakes m/m & y/y and July Consumer Confidence, UK June Retail Sales m/m & y/y, US July 19th Initial Jobless Claims and July 12th Continuing Claims, US July Manufacturing PMI, US June New Home Sales m/m and Kansas City Fed Manufacturing Activity.
Currency Tech
EUR/USD
R 2: 1.3550
R 1: 1.3490
CURRENT: 1.3450
S 1: 1.3400
S 2: 1.3296
GBP/USD
R 2: 1.7192
R 1: 1.7105
CURRENT: 1.7037
S 1: 1.7000
S 2: 1.6923
USD/JPY
R 2: 102.05
R 1: 101.80
CURRENT: 101.44
S 1: 101.07
S 2: 100.76
USD/CHF
R 2: 0.9156
R 1: 0.9037
CURRENT: 0.9030
S 1: 0.9000
S 2: 0.8970
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