By Kymberly Martin
NZD
The NZD/USD crept toward 0.8130 overnight, before strong demand for the USD early this morning saw the NZD knocked lower.
Yesterday the NZD/USD found support at the key 0.8060 level, moving higher over the course of the evening.
However, early this morning, positive US data releases resulted in broad USD strength. Although this saw the NZD gap lower, it soon found its feet again. The NZD/USD trades around 0.8100 currently.
Broad USD sentiment will continue to be the key driver of the NZD/USD at present.
However, today, the NZD could gain some support domestically. Fonterra is expected to announce its 2013/2014 forecast pay-out this morning.
We expect it should be well above the current estimate ($6.25 to $6.30) for the season just ending.
For today, key near-term NZD/USD support remains at 0.8060. Resistance will be encountered approaching 0.8150.
The NZD outperformed its key European peers overnight. Despite the USD volatility, the NZD/EUR was on a fairly steady upward path over the past 24-hours, rebounding from last week’s lows.
The NZD/EUR trades around 0.6290 this morning.
The NZD/AUD has pushed on higher overnight to sit at 0.8400 currently, close to its highs since January 2009.
From a fundamental perspective the cross is now a little above its ‘fair-value’ range of 0.8100-0.8.300. However, from a technical perspective there is little resistance for the cross ahead of the 0.8500 level.
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Majors
The USD was broadly stronger overnight. The JPY was the weakest performer over the past 24-hours.
Northern hemisphere markets returned from the Monday holiday in a relatively buoyant mood. Overnight, European equities returned between 1-2%.
Our risk appetite index (scale 0-100%) remained a fairly solid 74%.
However, the key driver for currencies came in the early hours of this morning, in the form of better-than-expected US data releases. May consumer confidence surged to 76.2 (71.2 expected).
The Richmond Fed manufacturing index came in at -2 (-4 expected). The USD index popped from around 83.80 to above 84.20 as US 10-year bond yields broke higher to 2.13%.
The data have re-ignited the debate around the timing of the US Fed’s tapering of QE. In this context, next Friday’s US payrolls data will now be crucial in determining whether positive USD sentiment can be maintained.
The labour market remains absolutely central to the Fed’s decision-making process.
The EUR slipped along with most of its European peers as the USD strengthened. The EUR/USD sits around 1.2870 this morning.
The JPY resumed weakening yesterday, after the Japanese equity market opened higher, and bounced back a little from its recent spectacular fall.
The strong inverse relationship between the JPY and the Japanese Nikkei index appears intact. The USD/JPY sits around 102.20 this morning after fairly steady overnight trading.
The AUD has been amongst the strongest performers over the past 24-hours. However, after reaching toward 0.9700 overnight, it was knocked lower on the back of USD buying early this morning.
It trades around 0.9640 currently. Crucial support remains at 0.9580, the level that marked the low on the AUD/USD mid last year.
Today, the Bank of Japan Governor, Kuroda, is scheduled to speak at the BoJ conference. His words will be closely dissected for intentions of further monetary easing, even as the Governor remains adamant the Bank’s actions are not specifically designed to weaken the JPY.
Tonight, German unemployment data is released, along with US mortgage applications. The Bank of Canada announces interest rates, and is expected to leave its cash rate at 1.0%.
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