The Australian and New Zealand dollars held near record highs versus the euro on Thursday, giving back only a bit of ground as markets locked in some profits ahead of the European Central Bank policy meeting. Investors had sold the single currency in anticipation of an interest rate cut by the ECB, pushing the euro within a hair of its February trough at A$1.2124 and to a lifetime low around NZ$1.5540.
Against the greenback, the Aussie traded at $1.0259, not far off a two-month peak of $1.0320 set overnight. The kiwi was at $0.8026, having touched a two-month high at $0.8065. Both traded in slim ranges on the greenback, ahead of the ECB decision. The kiwi held above key technical support at $0.8014, its 100-day moving average. Strong resistance is seen around $0.8060, a trough hit in March. Traders said a clear break above that level is needed for the kiwi to push higher.
The Aussie has good support at $1.0256/57, the 100-/200-DMA, ahead of $1.0146, the 23.6 pct retracement of its June rally. The euro could fall further if the ECB delivers a bigger-than-expected rate cut, or more stimulus than what is already priced in. But anything less could see the euro jump back up. In late trade, the single currency bought A$1.2205 and NZ$1.5604.
"Given that a 25-basis-point-easing by the ECB is a surefire bet, I expect kiwi/euro to easily surpass 64.20-64.40 (around NZ$1.5540-1.5520) and test resistance at 64.50 (NZ$1.5500) before falling back down," said a trader in Auckland. Interbank futures implied a less-than-evens chance of a rate cut next month, although they still have around 75 basis points worth of cuts priced in over the next 12 months. New Zealand government bonds rose, pushing yields 4.5 basis points lower along the curve. Bonds were supported after solid demand at a domestic auction. Australian government bond futures were also higher with the three-year contract up 0.07 points at 97.530 and the 10-year 0.075 points higher at 96.970.
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