The Kiwi weakened against the USD, during the Asian session, as RBNZ decided to cut rates by 25 basis points reaching +1.50%. In its accompanying statement the bank cited uncertainty about the global economic outlook, low business sentiment and that inflationary pressure is projected to rise only slowly. In his press conference later on, RBNZ governor Adrian Orr stated that the US-China trade war is one of the bank’s major concerns and that he was surprised by the downturn of the business sentiment. He also mentioned that the forward outlook looks to be more balanced now than before the cut. The NZD seems to be recovering most of the losses suffered and we expect it to continue to rise somewhat, but if there are further negative news about the US-Sino relationships we could see it weakening. NZD/USD dropped as the NZD weakened from the RBNZ interest rate decision, yet quickly recovered most of its losses and landed above the 0.6565 (S1) support line. We could see the pair recovering more losses, yet we retain a bearish outlook for the pair as the downward trendline incepted since the 27th of March remain intact. Should the pair remain under the selling interest of the market, we could see it breaking the 0.6565 (S1) support line and aim for the 0.6515 (S2) support barrier. Should the pair’s long positions be favored by the market, we could see it breaking the 0.6610 (R1) resistance line and aim for the 0.6650 (R2) resistance hurdle.
JPY continues to strengthen as trade concerns rise
The JPY continued to strengthen yesterday, as trade worries were enhanced by the escalation in the US-Sino relationships. US officials mention that US President Trump’s threats for additional tariffs were prompted by China backtracking from agreed issues. The Chinese official news agency called the US approach as regrettable and stated that despite China being reluctant to fight a trade war, it is not afraid and will do so if necessary. It should be noted that Chinese Vice Premier Liu He is expected in Washington for talks in the next couple of days. Should the escalation in the US-Sino relationship continue to rise, we could see the JPY strengthening even further. USD/JPY dropped even lower yesterday, breaking the 110.30 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair, as the downward trendline incepted since last Friday, remains intact. Please note though that the pair’s RSI indicator in the 4 hour chart is just below the reading of 30, implying a rather overcrowded short position. Should the bears maintain control over the pair’s direction, we could see it breaking the key support level of 109.75 (S1), thus opening the way for the 109.15 (S2) support line.
Other economic highlights, today and early tomorrow
In the European morning, we get Germany’s industrial output growth rate for March and in the American session, Canada’s House starts (Annualized) figure for April along with the EIA crude oil inventories figure from the US. In tomorrow’s Asian session we get China’s PPI and CPI rates for April. As for speakers, BoE’s Ramsden, ECB President Mario Draghi and Fed’s Brainard are speaking today.
NZD/USD H4
Support: 0.6565 (S1), 0.6515 (S2), 0.6475 (S3)
Resistance: 0.6610 (R1), 0.6650 (R2), 0.6700 (R3)
USD/JPY H4
Support: 109.75 (S1), 109.15 (S2), 108.50 (S3)
Resistance: 110.30 (R1), 110.90 (R2), 111.40 (R3)
