Australia, NZ dollars aim for another weekly rise, eye major resistance

23 Aug, 2024

SYDNEY: The Australian and New Zealand dollars were looking to seal another week of gains on Friday as upbeat surveys of global service sectors supported risk sentiment, though both had stalled at key chart barriers.

The Aussie steadied at $0.6712, having drifted away from its recent $0.6760 top.

That left it 0.7% firmer for the week, which would be its third straight week of increases. A break of $0.6783 would open the way to $0.6871.

The kiwi dollar stood at $0.6145, having climbed 1.5% for the week to as high as $0.6178.

This would be its fourth week of gains, with the next target at $0.6222.

The US dollar had bounced overnight as investors squared some short positions ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech.

Markets assume he will confirm that an easing cycle is likely to start in September, which is already priced in, but might suggest a cut of 25 basis points is more likely than an outsized 50 basis points.

“Given financial markets are currently pricing a large 96bp of cuts over the next three meetings, the risk lies towards less cuts being priced after Powell speaks, which can support the US dollar,” said Kristina Clifton, a senior currency strategist at CBA.

Australia, NZ dollars near major resistance as US yields decline

Investors see little prospect of the Reserve Bank of Australia (RBA) following with a cut in September, and only around a 50-50 chance of an easing in November.

They are far more dovish on the Reserve Bank of New Zealand, which already kicked off its easing cycle with a cut this month and flagged a lot more to come.

Swaps are fully priced for quarter-point cuts in October and November, with some chance one of them will be 50 basis points.

The need for stimulus was underlined by data showing New Zealand retail sales volumes sank 1.2% in the June quarter, while sales per person dropped 1.5% for the 10th straight quarter of declines.

“The figures were in keeping with the generally soft tone of the economic data over the June quarter, which together indicate that GDP is likely to be particularly soft for this period,” said Michael Gordon, a senior economist at Westpac.

He expects the economy shrank 0.6% in the quarter, extending a long run of subdued readings.

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