Commodity currencies whippy after recent strong run - AmpGFX

The AUD and NZD have been surprisingly strong in the last month, including the last week, notes the analysis team at Amplifying Global FX Capital. 

Key Quotes

“This may have started as a correction from an oversold position in May, where both currencies and CAD were weak relative to other major and emerging market currencies.  However, they have now fully retraced losses in April and May.”

“In the last week, they have out-performed most other currencies.  However, price action has become whippier around resistance levels.  On Monday they are down and maybe starting to display signs of peaking again.”

“The further rise in AUD and NZD last week may have been led by the surprising shift in tone to a tightening bias by the Bank of Canada and surge in CAD.”

“AUD and NZD have parallels with CAD. All three are affected by high levels of household debt and rapid growth in house prices in recent years.  Moody’s downgraded Canadian banks in May due to their exposure to the housing market.  Moody’s followed suit in Australia on Monday, cutting ratings of all 12 banks, and their New Zealand subsidiaries.  S&P downgraded regional banks in Australia in May.”

“The market may have become a bit wary that the RBA and RBNZ might emulate the Bank of Canada, and shift to a tightening bias.”

“It is not likely, but the market is right to be cautious.  Australian employment growth has picked up this year.  New Zealand data has ebbed recently, but retains a solid trend.  NZ PMI surveys for manufacturing and service sectors both rose to robust levels, reported on Friday 16 June and Monday.”