The Australian and New Zealand dollars were heading for their best week in three months on Friday with even a slowdown in Chinese factory activity prompting only limited profit-taking. Factory output in Australia's largest trading partner expanded in June at its slowest pace in 28 months, indicating the world's second biggest economy is feeling the pinch of monetary policy tightening.
But losses were modest as hopes grew the slowdown would restrain inflation and put off further tightening in China. The Aussie dollar plumbed a session low at $1.0673 in reaction to the data, but subsequently recovered to stand at $1.0711. That was up 2 percent on the week and nearly 3 percent higher from an 11-week trough around $1.0390 plumbed on Monday.
Immediate support is seen at $1.0661, the 55-day moving average, with resistance at the overnight peak of $1.0751. This week's dramatic bounce, sparked by optimism that Greece will secure emergency loans, has reduced the risk of a break lower for the Aussie and may even help it build a base for another go at the 29-year peak of $1.1012 set in early May.
Analysts said this is likely particularly as sentiment for the US dollar remains sour. "You've got the Greece issue fading into the background and next week you'll probably get the ECB raising rates. Across the Atlantic, you've got a weak economy and a Congress that can't agree on stabilising their debt," said Joseph Capurso, strategist at Commonwealth Bank.
"I can certainly see the US dollar falling further next week and that is going to push the Aussie a few cents higher." Meanwhile, the kiwi dollar slipped to around $0.8264, a day after hitting a post-float high of $0.8320. "Leaving aside the Chinese numbers, I think the kiwi has further to go as people turn their attention from the euro to the US dollar," said Derek Rankin of Rankin Treasury Advisory. Near term support for the kiwi is seen at $0.8185, with the post-float high a major resistance. Rankin has a long term forecast for the kiwi reaching $0.8625 by year end, but he said it could reach that level well before given its recent solid performance - up nearly 2 percent this week and nearly 7 percent this year.
"The US dollar has some serious problems looming as they look to tackle their debt issue, and that's probably not goiing to be brilliant," he said The Aussie/kiwi pair was a touch firmer at NZ$1.2952, but still within a relatively tight range. Against the battered sterling, the Anti-podeans held near 26 year peaks, with the Aussie at A$1.4991 per pound and the kiwi around NZ$1.9430 per pound. Sterling has come under pressure since the Bank of England policymakers recently flagged the possibility of more monetary easing.
Comments
Comments are closed.