SYDNEY: The Australian and New Zealand dollars faced a second week of painful losses on Friday as their US cousin benefited from the prospect of earlier rate hikes, while breaks of multiple chart supports encouraged algorithmic sellers.
The Aussie was huddled at $0.7286, having shed 1.5% for the week so far to be a long way from its recent peak of $0.7555. The loss of support at $0.7360 and $0.7320 turned the technical outlook decidedly bearish, with the next targets being $0.7273 and $0.7220.
The kiwi dollar was down 1.4% for the week at $0.7018 and looking vulnerable following the break of the 200-day moving average at $0.7097. The next targets are $0.6980 and the September trough of $0.6860.
Both currencies have been undermined by concerns about slowdown in China, their biggest export market, and a pullback in key resource prices, notably iron ore.
Some commodities did bounce overnight amid reports Beijing was acting to contain the risks of wider economic damage from a fallout in the property sector, although the jury was out on how effective they would be.
The US dollar has been buoyed broadly by speculation the Federal Reserve will have to bring forward rate rises given October's alarming spike in inflation.
While Fed officials have sounded increasingly worried that inflation might prove long lasting, the Reserve Bank of Australia (RBA) is sticking to its dovish outlook for rates.
Policy makers argue a tightening is extremely unlikely until 2023, even though investors are wagering on a move to 0.25% by June or July and rates around 1.0% by year end.
Three-year bond yields have shot up 80 basis points in just two months to reach 1.045%, while 10-year bonds are trading 25 basis points above Treasuries at 1.837%.
That pricing could shift next week when wage data for the third quarter is released, given the RBA wants to see wage growth accelerating markedly to 3% annually before hiking.
Catherine Birch, an economist at ANZ, is looking for only a moderate rise of 0.6% in the wage price index, though there are risks on both sides. That would lift the annual pace to 2.2%, which is much where it was before the pandemic.
"Households are still reporting weak actual wages growth, and we haven't yet seen a 'Great Resignation' here to put upward pressure on wages," she said. "Next year is when we think wages growth will really accelerate, reaching 3% y/y in the second half of 2022."
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