China's oil import surge changes sentiment. Softer USD driven by Fischer comments, no 'smoking gun'

By Kymberly Martin

The USD has weakened against European currencies. “Oil-linked” currencies have outperformed.

The NZD/USD sits at a similar level to yesterday morning, at 0.6620.

In an evening of relatively little data-flow, a solid rebound in global oil prices in the early hours of this morning has helped boost “oil-linked” currencies such as the CAD and NOK. The move in the oil price appears assisted by data showing that Chinese imports of crude made a record monthly gain in July. The USD/CAD has fallen 1.3% since last evening, to trade at 1.3010 this morning.

Elsewhere the EUR and GBP gained the upper-hand in the early hours of this morning. An earlier rally in the USD appeared to fizzle out after comments from Fed Vice Chair Fischer, that seemed to provide no smoking gun for a Sept rate hike. The EUR/USD trades a little higher at 1.1020 this morning.

Meanwhile the USD/JPY looked to be making another attempt at the 125.00 level last night but the move petered out. It trades at 124.60 currently. Over the medium-term we continue to look for the USD/JPY to trade sustainably above 125.00 as the Fed raises rates while the Bank of Japan maintains highly accommodative policy.

The AUD/USD and NZD/USD both rebounded from intra-night lows in the early hours of this morning, in the backdrop of a softer USD.

From below 0.6560 the NZD/USD now sits at 0.6620, at a similar level to where it ended last week. It sits within a narrow near-term range where support is seen around 0.6500 and resistance is eyed at late-July highs of 0.6740.

While some further drift higher is plausible this week, we ultimately see this range being broken to the downside. We continue to target 0.6200 by year-end.

Kymberly Martin is on the BNZ Research team. All its research is available here.