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Sustained Weakness in Antipodean FX, EURUSD Approaching Key Support

FOREX
  • The New Zealand Dollar retreated aggressively on Tuesday, with markets swiftly paring rate hike expectations as New Zealand re-enters lockdown.
  • With a fresh 3-day nationwide lockdown (and a 7-day lockdown in Auckland and surrounding areas), a number of sell-side analysts have revised their calls for a 25bps rate hike from the RBNZ. Their decision and statement will be published overnight.
  • NZDUSD consolidated losses throughout US hours with the pair trading in close proximity to the 0.6900 lows. A break of key support and the bear trigger at 0.6881 would confirm a resumption of a bearish cycle that started late February with notable supports below: 0.6798 Sep 18, 2020 high and 0.6703, 38.2% of the Mar '20 - Feb bull run.
  • Broad greenback strength helped AUDUSD play catch up to the move, extending weakness through the year's lows at 0.7290. Settling around the 0.7250 mark, the pair dipped 1.2% for the day.
  • With global macro developments continuing to weigh on risk sentiment/equity indices, the US dollar garnered strong support overall. GBP and NOK were other notable losers, falling around 0.75% with other haven currencies such as JPY and CHF subsiding by a more modest 0.25%.
  • With recent weak US data points unable to prompt a sustained bounce in EURUSD, major support at 1.1704/06 looks increasingly vulnerable.
  • A break below would leave the single currency at the lowest levels since November 2020 and may target 1.1603, low Nov 4, 2020. Below here, the immediate post pandemic highs at 1.1495 would likely act as strong psychological and pivot support, matching closely with the 50% retracement of the March 2020-Jan 2021 price swing.
  • Aside from the anticipated RBNZ meeting, Wednesday will see CPI prints for both the UK and Canada.
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