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Greenback Weakness Extends, NZD Squeezes Ahead Of Jobs Data

FOREX
  • The USD index sits marginally in the red on Tuesday, extending yesterday’s strong sell-off. A light calendar and broadly in-line US ISM Manufacturing PMI data did little to stoke any G10 currency volatility as markets await more major central bank meetings later in the week.
  • Particular beneficiaries were once again AUD (+0.67%) and NZD (+0.93%), boosted by equity benchmarks consolidating at better levels, an advance for metals and higher commodity indices in general.
  • AUDUSD failed to gather any downward momentum following the post-RBA downtick and continued to grind higher throughout both the European and US trading sessions. Furthermore, Friday’s false break of 0.6993/91, the Dec 3 2021 and Nov 2, 2020 lows has contributed to the squeeze/recovery with firm short-term resistance now in focus at 0.7130, the Jan 7 low.
  • NZD’s outperformance comes ahead of quarterly employment data due overnight. Further gains may target the December lows of 0.6702, the most notable short term resistance point.
  • The Pound also caught a bid, with cable rising 0.48% as well as the pressure on the cross which has been edging back towards the 0.8300 as we approach Thursday’s BoE meeting. The MPC looks set to raise Bank Rate by 25 basis points for a second meeting in a row taking it to the 0.5% threshold for it to begin reducing the size of its balance sheet, and to open the door to another hike in May.
  • Yesterday’s daily close for EURUSD highlights a 3-day Japanese candle reversal known as a morning star. This suggested scope for a stronger short-term corrective which did play out throughout Tuesday. EURUSD came within 14 pips of the next firm resistance at 1.1293, the 20-day EMA, before settling around 1.1250.
  • Overnight, RBA Governor Lowe is due to speak at the National Press Club, in Sydney with a Q&A expected. In Europe, HICP inflation data will be published before Thursday’s ECB meeting.
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