NZD Surges on Hawkish RBNZ, Dollar and Yen Pressured

New Zealand Dollar surges sharply today, on surprisingly hawkish RBNZ which started to signal a rate hike. Strength in the Kiwi is somewhat lifting Australian Dollar, and to a lesser extent Canadian. On the other hand, Dollar and Yen are both turning weaker, followed by Euro and then Swiss Franc. A focus for today is whether commodity currencies would overtake Euro’s place in the buying against Dollar and Yen.

Technically, EUR/AUD is worth a watch today. Break of 1.5680 support will be the first sign that corrective pattern from 1.5250 has completed. We might then seen the cross accelerates down to 1.5418 support next. At the same time, AUD/USD could follow by rising towards 0.7890 resistance. Break will target a test on 0.8006 high. Such developments, if happen, will suggest that comeback of Aussie, as inspired by the rally in Kiwi.

In Asia, at the time of writing, Nikkei is up 0.30%. Hong Kong HSI is up 0.71%. China Shanghai SSE is up 0.29%. Singapore Strait Times is up 0.72%. Japan 10-year JGB yield is down -0.0018 at 0.073. Overnight, DOW dropped -0.24%. S&P 500 dropped -0.21%. NASDAQ dropped -0.03%. 10-year yield dropped -0.044 to 1.564.

NZD/USD and NZD/JPY upside breakout as RBNZ signals Sep 2022 rate hike

New Zealand Dollar surges sharply after RBNZ kept monetary policy unchanged, but signaled that a rate hike could occur as soon as in September 2022. Governor Adrian Orr also said he felt comfortable using OCR projection as guidance. Though, the projections are “very highly conditional”, and will only be realized if economy pans out as expected.

NZD/USD break through 0.7304 resistance today and resumes the rally from 0.6942. Notable support was seen from 55 day EMA which affirms near term bullishness. Further rise is now expected as long as 0.7153 support holds. Retest of 0.7463 high should be seen next. Break there will resume larger up trend from 0.5467.

NZD/JPY breaks through 79.40 resistance as up trend form 59.49 resumes. Near term outlook will now remain bullish as long as 77.91 support holds. Next target is 61.8% projection of 68.86 to 79.19 from 75.61 at 81.99.

BoJ Suzuki: Desirable to constrain pace of increase in ETFs and J-REITs purchases

BOJ board member Hitoshi Suzuki said in a speech that it’s important for the central to “conduct purchases of ETFs and J-REITs while paying attention to its financial soundness.” As the EFT and J-REIT holdings increase, “the impact on the Bank’s balance sheet will become large.”

Hence, “it is desirable for the Bank to constrain the paces of increase in their amounts outstanding as much as possible by conducting the purchases flexibly; it will decisively conduct them on a large scale during times of heightened market instability while refraining from conducting them during normal times.”

Fed Daly: We’re talking about talking about tapering only

San Francisco Fed President Mary Daly told CNBAC that “we haven’t seen substantial further progress just yet. We’re still looking for substantial further progress.”

“What we’ve seen is some really bright spots, some very encouraging news. It gives me hope, and I am bullish for the future. But it’s too early to say that the job is done,” she added.

Also, “we’re talking about talking about tapering, and that is what you want out of us. You want to be long-viewed here,” she said. “But I want to make sure that everyone knows it’s not about doing anything new. Right now, policy is in a very good place. Policy is supporting the American people.”

On the data front

New Zealand trade surplus widened to NZD 300m in April, above expectation of NZD 90m. Japan corporate service price index rose 1.0% yoy in April, below expectation of 1.5% yoy. Australia Westpac leading index rose 0.2% mom in April, construction work done rose 2.4% in Q1. Swiss will release ZEW expectations today.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.2219; (P) 1.2242; (R1) 1.2273; More….

EUR/USD’s rally is still in progress and intraday bias stays on the upside for retesting 1.2348 high. Firm break there will resume larger up trend from 1.6039 for 1.2555 cluster resistance next. On the downside, however, break of 1.2160 support will delay the bullish case. Intraday bias will be turned back to the downside to extend the consolidation pattern from 1.2348 with another falling leg.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD Trade Balance (NZD) Apr 388M 90M 33M 39M
23:50 JPY Corporate Service Price Index Y/Y Apr 1.00% 1.50% 0.70%
00:30 AUD Westpac Leading Index M/M Apr 0.20% 0.40% 0.50%
01:30 AUD Construction Work Done Q1 2.40% 2.20% -0.90% -1.50%
02:00 NZD RBNZ Interest Rate Decision 0.25% 0.25% 0.25%
03:00 NZD RBNZ Press Conference
08:00 CHF ZEW Expectations May 67.4 68.3
14:30 USD Crude Oil Inventories -1.0M 1.3M

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