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Greenback Firms Amid Weakness In Equities, NZD Falls 0.6% Ahead of RBNZ

FOREX
  • Despite the US dollar whipsawing throughout US hours, the DXY sits 0.3% firmer as we approach the APAC crossover. The moderate greenback strength is in line with weaker major equity benchmarks as e-mini S&P futures extend their decline to 1%.
  • Antipodean FX sits bottom of the G10 pile, with both Aussie and Kiwi seen down around 0.6%. The move for NZDUSD comes ahead of Wednesday’s RBNZ decision where MNI believe that the RBNZ can afford to step down to a 25bp hike as inflation and inflation expectations are moving in the right direction and policy is now restrictive. However, with inflation elevated and demand robust, the RBNZ is still likely to tighten further and keep its tightening bias.
  • EURUSD (-0.30%) has also moved south on Tuesday, although last Friday’s low at 1.0760 has acted as solid support up to this point. Overall, following the break of the 50-day EMA, at 1.0879, EURUSD has strengthened bearish conditions, signalling scope for a continuation lower towards 1.0737 next, a Fibonacci retracement. Clearance of this level would place the focus on 1.0713, the Mar 24 low. A firm resistance is now seen at 1.0899, the 20-day EMA.
  • USDJPY sits close to unchanged on the session, although the pair has registered a new multi-month high at 138.91, placing the pair briefly at the best levels since November 2022.
  • Looking ahead, UK April CPI will precede German IFO data, both due to cross the wires on Wednesday. The focus for the US docket will be on the FOMC minutes. Attention will then be on any revisions to Q1 growth data and US Core PCE Price Index data due later in the week.
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