It has been a very volatile day for the kiwi and aussie, creating the largest intraday move in AUDNZD since the global financial crisis. The pair initially rocketed higher on the back of a very dovish policy meeting at the RBNZ, before it was propelled even higher by stronger than expected Australian labour market data. The ensuing rally was strong enough to push AUDNZD through 1.0900 and 1.1000. In total, the pair is up around 2.5% at the time of writing since yesterday.
In Australia, the unemployment rate unexpectedly dropped to 6.0% in May from a revised 6.1% in April. Also, the economy added many more jobs than expected over the month, with employment rising an encouraging 42K, including a 14.7K jump in full-time jobs. The only slightly concerning part of the report was that the participation rate and the numbers of jobs added were revised lower for April, which is going to make AUD nervous and is likely why AUUSD wasn’t able to punch through 0.7800.
Across the Tasman, the Reserve Bank of New Zealand (RBNZ) cut interest rates for the first time in four years, lobbing 25 basis points off the official cash rate, citing low inflationary pressures and an expected weakening in demand. At the same time, the bank opened the door for even looser monetary policy later this year, with Governor Wheeler noting that further easing may be appropriate beyond today’s cut that brought the OCR to 3.25%. This resulted in a widespread sell-off in the NZ dollar, as the market wasn’t expecting the bank to be this dovish – NZDUSD is now nervously holding above the precipice that is 0.7000.
AUDNZD
The pair has broken through its 25% Fibonacci retracement level from 2011’s high and the road looks clear for a test of 1.1300 in the long-term. There’s some technical strength in the pair; bullish divergence between price and RSI on a weekly chart suggests that momentum has shifted to the upside in the long-term. In saying that, we cannot rule out a retracement in the short-term, especially if profit taking takes off.
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Recommended Content
Editors’ Picks
EUR/USD holds positive ground above 1.0700, eyes on German CPI data
EUR/USD trades on a stronger note around 1.0710 during the early Monday. The weaker US Dollar below the 106.00 mark provides some support to the major pair. All eyes will be on the Federal Reserve monetary policy meeting on Wednesday, with no change in rate expected.
USD/JPY extends recovery after testing 155.00 on likely Japanese intervention
USD/JPY is recovering ground after crashing to 155.00 on what seemed like a Japanese FX intervention. The Yen tumbled in early trades amid news that Japan's PM lost 3 key seats in the by-election. Holiday-thinned trading exaggerates the USD/JPY price action.
Gold tests critical daily support line, will it defend?
Gold price is seeing a negative start to a new week on Monday, having booked a weekly loss. Gold price bears the brunt of resurgent US Dollar (USD) demand and a risk-on market mood amid Japanese holiday-thinned market conditions.
XRP plunges to $0.50, wipes out recent gains as Ripple community debates ETHgate impact
Ripple loses all gains from the past seven days, trading at $0.50 early on Monday. XRP holders have their eyes peeled for the Securities and Exchange Commission filing of opposition brief to Ripple’s motion to strike expert testimony.
Week ahead: FOMC and jobs data in sight
May kicks off with the Federal Open Market Committee meeting and will be one to watch, scheduled to make the airwaves on Wednesday. It’s pretty much a sealed deal for a no-change decision at this week’s meeting.