SYDNEY: The Australian and New Zealand dollars stuttered on Friday, and were poised for the fourth week of losses as higher U.S. yields boosted the U.S. currency, with the bearish technical setup suggesting the two may have further to fall.
The Aussie fell 0.15% to $0.6631 on Friday, having eked out a small 0.1% gain overnight even as the dollar pulled back more broadly. Bears are targeting the 200-day moving average of $0.6629, which is the near-term support for now.
It is now set for a weekly drop of 1.1% and has fallen about 4% from its recent top of $0.6943 hit at the end of September.
The kiwi dollar was off 0.2% at $0.6003, after edging up 0.2% overnight. It is also down 1.1% for the week, with support at about $0.5975 and $0.5850.
The dollar paused its ascent overnight as Treasury yields came off their highs, but still the recent strong U.S. data and growing bets that Donald Trump will win the White House with the promise of hefty tariffs mean the Federal Reserve will be more restrained in delivering large rate cuts.
Futures imply a total easing of 43 basis points from the Fed this year.
Australia, NZ dollars find support after sell-off, bonds bounce
Sean Callow, a senior FX analyst at ITC Markets, said the Aussie is likely to struggle in the near-term, having benefited little from bets that the Reserve Bank of Australia is unlikely to cut interest rate early.
“The Aussie’s main problems near term are that the sugar hit from China stimulus announcements late September has faded and that markets have mostly decided that Trump will win, which in turn means AUD underperformance.”
Local bonds rose for a second straight day but are still headed for big weekly losses. Ten-year bond futures gained 4 ticks to 95.58, but were down 15 ticks for the week.
Looking ahead to next week, Australia’s third-quarter inflation data will be in focus. The headline measure is expected to be back in the target band of 2-3%, but underlying inflation will likely be sticky.
ANZ expects the trimmed mean measure to print at a quarterly rate of 0.8%, saying any upside surprise is likely to delay the start of the easing cycle from the Reserve Bank of Australia.
“A trimmed mean print at or below 0.6% q/q would make a rate cut this year possible,” their analysts said in a note.
Swaps imply first easing is only fully priced in for April next year.