Today’s top mover: NZD/JPY losing momentum ahead of 4H 55 EMA

    At the time of writing, NZD/JPY is the biggest mover today. But considering that it’s just down -49 pips or -0.67%, it’s place could easily been taken out by others at close. Also, it’s showing that today’s trading is rather dull.

    Similar to other Yen crosses, NZD/JPY spiked lower to 69.18 last week on the currency flash crash. It was held slightly above 68.88 key support and rebounded. Rise from 69.18 is seen as a corrective move only and it’s already losing some momentum ahead of 4 hour 55 EMA.

    While another rise cannot be ruled out yet, upside  should be limited by 74.03 minor resistance. On the downside, below 72.12 minor support will turn bias back to the downside for retest 69.18 low.

    From a medium term point of view, weekly MACD turned negative and crossed below signal line. NZD/JPY is held well below falling 55 week EMA. Both carry mildly bearish implications. For now, we’d favor an eventual break of 68.88 (2016 low) to resume the down trend from 94.01 (2015 high). In that case, next medium-to-long-term target will be 100% projection of 94.01 to 68.88 from 83.90 at 58.77. This will now remain the preferred case as long as 74.03 minor resistance holds.

    An update on AUD/JPY short

      As we planned in the weekly report here, we’ve sold AUD/JPY today at 80.25 when the cross recovered to 80.43 after RBA rate decision. Currently, the AUD/JPY is in consolidation pattern from 79.51 temporary low and it’s uncertain how long such consolidation will last. Hence, we’ll keep the stop unchanged at 81.00. That is slightly above 61.8% retracement of 81.78 to 79.51 at 80.91, as well as 4 hour 55 EMA (now at 80.76). We’ll lower the stop when AUD/JPY breaks 79.51 low.

      Overall outlook is unchanged that AUD/JPY is extending the larger down trend form 90.29. First target is 61.8% projection of 83.92 to 79.69 from 81.78 at 79.16. This level is close to 61.8% retracement of 72.39 to 90.29 at 79.22. Even though it’s a cluster, based on current momentum, we’d expect it to be taken out with relative ease. The real test lies in 77.55/85 (61.8% projection of 90.29 to 80.48 from 83.92 at 77.85, 100% projection of 83.92 to 79.69 from 81.78 at 77.55). We haven’t decided whether to get out from there yet and will look at the downside momentum to decide.

      We’re indeed looking at the prospect of deeper fall towards 72.39 low, as the rejection from falling 55 week EMA was rather bearish in medium term.

      AUD/CAD edges higher, on track to 0.9696

        AUD/CAD edged higher today as rise from 0.9247 is trying to continue towards 0.9696 high. Prior support from 55 day EMA was a clear sign of near term bullishness. We’re seeing corrective pull back from 0.9696 as completed at 0.9247. Decisive break there will resume whole rise from March’s low of 0.8066. Next near term target will be 61.8% projection of 0.8066 to 0.9696 from 0.9247 at 0.8870. Though, break of 0.9603 will delay the bullish case and bring some more consolidations first.

        US stocks extend record run as NASDAQ breaks 9000

          US stocks extended record run in holiday trading this week, with all three major indices closing at new record highs. S&P 500’s rally in the past two week is impressive, with strong pick up in upside momentum. Long term channel resistance was taken out without much hesitation.

          Overbought condition in weekly RSI shouldn’t limit the rally for now. Current up trend is now on track to 100% projection of 1810.10 to 2940.91 from 2346.58 at 3477.39. Though, strong resistance should be seen around there to bring corrections.

          NASDAQ also extended recent up trend and closed above 9000 level for the first time. It’s now facing long term channel resistance. Considering that equivalent resistance was taken out by S&P 500 rather decisively, we’d expect NASDAQ to follow soon. NASDAQ should be heading to 100% projection of 4209.76 to 8133.30 from 6190.17 at 10113.71.

          BoJ Sakurai: Increasing need to be mindful of side-effect of low-rate policy

            BoJ board member Makoto Sakurai, warned in a speech, “in guiding monetary policy, there’s an increasing need to be mindful of the side-effect of continuing our low-rate policy such as that on Japan’s banking system.”

            “If there’s a crisis that could disrupt Japan’s financial system,” he noted, “a bold policy response is necessary”. However, ” if the overseas slowdown driven by trade woes is moderate, and the speed at which it affects Japan’s economy is slow, we have room to scrutinise economic indicators in deciding on policy”.

            He added, “the next half-year is when we need to carefully scrutinise economic developments”, including the impact of sales tax hike and global slowdown.

            RBA Lowe: Health and economic emergencies will cast a shadow over our economy

              RBA Governor Philip Lowe said today that the economy will likely contract by around -10% in the first half. Most of the decline would take place in Q2 due to the coronavirus pandemic. At the same time, unemployment rate could jump from March’s 5.2% to around 10% by June.

              He also sounded cautious regarding the post pandemic recovery. “Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual,” he said. “Rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come.”

              US initial jobless claims unchanged at 264k

                US initial jobless claims was unchanged at 264k in the week ending June 17, above expectation of 256k. Four-week moving average of initial claims rose 8.5k to 256k highest since November 13, 2021.

                Continuing claims dropped -13k to 1759k in the week ending June 10. Four-week moving average of continuing claims dropped -7.5k to 1770.

                Full US jobless claims release here.

                US treasury yields surge, dollar trying to rebound

                  Dollar is apparently helped by surge in US treasury yields today, especially at the long end. While the momentum of the rebound isn’t too strong yet, the development is worth a note.

                  30 year yield is still the most impressive one like last Friday. It’s up 0.05 and breaches 3.08 handle. The development further affirms the case that the pull back from 3.247 has completed at 2.925. We’d likely seen further rise through 3.14 resistance in near term.

                  10 year yield is also finally showing meaningful movement. It’s up 0.045 at 2.941. Rebound from is likely resuming based on current momentum. And, break of 3.009 resistance should be seen in near term.

                  NZ BNZ performance of services dropped to 53.7

                    New Zealand BusinessNZ Performance of Services Index declined from 57.1 to 53.7 in November, still above long-term average of 53.6. Looking at some details, activity/sales dropped from 61.0 to 58.1. Employment tumbled from 57.1 to 51.8. New orders/business declined from 59.6 to 57.3. Stocks/inventories fell from 56.1 to 55.0. Supplier deliveries fell from 52.0 to 47.3.

                    BusinessNZ chief executive Kirk Hope said: “With its sister survey the PMI again showing contraction in November and economic headwinds approaching, the easing of expansion in activity is not unexpected. Also, with the Global PSI result of 48.1 at a 29-month low, it will be a tall order for the New Zealand services sector to continue the overall trends experienced during the second half of 2022”.

                    BNZ Senior Economist Craig Ebert said that “November’s PSI proved, for the third month running, to be an important counterpoint to the weakening PMI. It looks as though the services industries – just like they did in Q3 – will more than make up for any weakness in manufacturing in Q4, such that GDP for that quarter manages an expansion”.

                    Full release here.

                    New Zealand GDP grew 0.5% qoq, a look at bearish NZDUSD

                      New Zealand GDP grew 0.5% qoq in the March quarter, slowed from 0.6% qoq in the prior quarter and met expectation. Over the year, GDP grew 2.7% ended March 2018. Per capita GDP was unchanged, down from 0.1% qoq rise in the prior quarter. Services industries grew 0.6%, notably slowed from prior 1.1%. Good-producing industries were flat as jump in manufacturing was offset by fall in constructions. Primary industries rebounded by growing 0.6%, up from prior quarter’s -2.6%.

                      Full release here.

                      New Zealand Dollar remains pressured after GDP data and is extending the recent broad based decline. It’s trading as the weakest for today and for the week.

                      NZD/USD breaks May’s low at 0.6850 to resume recent down trend from 0.7436. NZD/USD action bias table and the D action bias chart show that the down trend is picking up downside momentum again.

                      Nonetheless, we’d like to point out that 0.6779 (2017 low) is a key support level decisive break there will confirm completion of the corrective rise from 2015 low at 0.6102. And that will very likely resume the long term down trend from 2014 high at 0.8835, through 0.6102. So for quick trading, selling NZD/USD is the strategy for sure. But one has to be alerted as it touches 0.6779. For position trading, we’d prefer to see if 0.6779 would be taken out firmly first.

                      US initial jobless claims dropped -1k to 222k in the week ended June 2

                        US initial jobless claims dropped -1k to 222k in the week ended June 2, below expectation of 225k. The four week moving average rose 2.75k to 225.5k.

                        Continuing claims dropped -6k to 1.72m in the week ended May 26. Four week moving average of continuing claims dropped -13.25k to 1.72875m, lowest since December 8, 1973.

                        BoE Pill unpacks MPC’s most recent communications

                          In a speech, BoE Chief Economist Huw Pill unpacked the MPC’s most recent communication about the outlook for monetary policy decisions.

                          The latest statement widened the discussions beyond the interest rate decision at August meeting. It reflected the “uncertainties” and “likelihood that we will have to take finely-balanced decisions over rates not just in August but also beyond that, in the face of two-sided risks to the economic outlook into next year.”

                          By referring to “‘any further increases in Bank Rate”, the BoE talked about rate increases, not decreases. But at the same time, the reference to “any” increases “allows for the possibility of remaining on hold”.

                          The focus on “indications of more persistent inflationary pressures” places emphasis on ” identifying potential second-round effects in price and wage setting behavior”. Thar prioritizes “the more persistent component of inflation developments over the headline spot measure.”

                          By signaling preparedness to ‘if necessary act forcefully in response’ to indications of greater persistence in inflation, the statement reflected “both my willingness to adopt a faster pace of tightening than implemented thus far in this tightening cycle”.

                          Full speech here.

                          UK PMI services finalized at 47.6, composite at 49.0

                            UK PMI Services was finalized at 47.6 in November, down from October’s 51.4. It’s the first contraction reading in five months. PMI Composite was finalized at 49.0, down from October’s 52.1, first contraction since June amid national lockdowns. Markit also noted the fastest drop in employment for three months. Though, year-ahead business optimism hit nine-month high.

                            Tim Moore, Economics Director at IHS Markit: “New lockdown measures and tighter pandemic restrictions unsurprisingly tipped UK private sector output back into decline during November…. Hopes that the pandemic will be brought under control from an effective vaccine resulted in a sharp improvement in business optimism during November. Across the UK private sector as a whole, confidence about the year ahead outlook reached its highest since March 2015. That said, survey respondents also cited rising business uncertainty in the short-term, largely due to ongoing restrictions on trade, which contributed to another round of job cuts and efforts to rein in discretionary spending during November.”

                            Full release here.

                            Eurozone PMI composite finalized at 52 in Feb, a resounding expansion of business activity

                              Eurozone PMI Services was finalized at 52.7 in February, up from January’s 50.8. PMI Composite was finalized at 52.0, up from prior month’s 50.3. Both were at their 8-month highs.

                              Looking at some member state, PMI composite improved in Spain (55.7, 9-month high), Ireland (54.5, 9-month high), Italy (52.2, 9-month high), France (51.7, 7-month high) and Germany (50.7, 8-month high).

                              Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “A resounding expansion of business activity in February helps allay worries of a eurozone recession, for now. Doubts linger about the underlying strength of demand… Nevertheless, there are clear signs that business confidence has picked up from the lows seen late last year…

                              “There is a concern, however, that signs of persistent elevated selling price inflation, combined with the surprising resiliency of the economy, will embolden the ECB into more aggressive monetary policy tightening, which poses a downside risk to demand growth in the months ahead.”

                              Full release here.

                              Canada employment grows 26.7, unemployment rate up to 6.2%

                                Canada’s employment grew 26.7k in May slightly above expectation of 24.8k. Part-time employment rose 62k while full-time jobs fell -36k.

                                Unemployment rate ticked up from 6.1% to 6.2%, matched expectations. Average hourly wages increased 5.1% yoy, up from April’s 4.7% yoy.

                                Full Canada employment release here.

                                NZD/USD dips after RBNZ hike, staying mildly bearish

                                  NZD/USD softens slightly after RBNZ rate hike and near term outlook stays mildly bearish with 0.7051 resistance intact. Deeper fall should be seen to 0.6858 support first. Break there will affirm the case that larger down trend from 0.7463 is resuming. Further decline should then be seen through 0.6804 support to 38.2% retracement of 0.5467 to 0.7463 at 0.6731 next.

                                  Japan Aso to watch current market move with sense of urgency

                                    At a regular press conference, Japanese Finance Minister Taro Aso emphasized that “currency stability is important”. He added that “we must closely watch the currency market move with a sense of urgency. Though, he didn’t give any comment of specific exchange rate levels. The comments came after Yen spiked higher yesterday in response to abrupt escalation of US-China trade war.

                                    Aso also noted that recent market volatility won’t change the government stance on the planned sale tax hike. The government will still proceed with October’s sale take hike from 8% to 10%, unless there is serious shocks in the economy.

                                    UK PM May to push EU to reopen Brexit negotiations

                                      UK Prime Minister Theresa May has told her cabinet today that Brexit negotiation has to be reopened with the EU, to provide legal changes to the Irish backstop. Her spokesman said that “the prime minister said that in order to win the support of the House of Commons legal changes to the backstop will be required, that would mean reopening the Withdrawal Agreement”. And he added that “a vote of the Brady amendment makes it clear that the current nature of the backstop is the key reason that the House cannot support the deal.”

                                      Also, May is expected to return to the Commons as soon as possible with a revised deal with the EU. If no deal could be reached by February 13, May will make a statement to the House that day, and table an amendable motion for debate the follow day.

                                      As for today, a so called Malthouse Compromise emerged which has support from heavy weight Brexiteers, Remainers as well as Northern Ireland DUP. But EU was quick to dismiss it. EU’s deputy chief negotiator, Sabine Weyand, had said technology to avoid a hard border does not exist.

                                      US initial jobless claims unchanged at 205k, matched expectations

                                        US initial jobless claims was unchanged at 205k in the week ending December 17, matched expectations. Four-week moving average of initial claims rose 3k to 206k.

                                        Continuing claims dropped -8k to 1859k in the week ending December 11. Four-week moving average of continuing claims dropped -49k to 1920k. Both are the lowest since March 14, 2020.

                                        Full release here.

                                        US House Speaker Ryan urged NAFTA agreement notification by May 17

                                          US House Speaker Paul Ryan told the NAFTA negotiation parties that May 17 is the deadline for the new NAFTA deal for eventual passage for the current Congress to vote on within this year. Ryan said “We have to have the paper – not just an agreement, we have to have the paper – from USTR by May 17 for us to vote on it this year, in December, in the lame duck”. But later, his spokesman said he referred to a notification of intent to sign the NAFTA agreement, not the full text. The new elected Congress will take office in January.

                                          Canadian Foreign Minister Chrystia Freeland said after meeting with US legislators that “we are definitely getting closer to the final objective.”

                                          Mexico’s Economy Minister Ildefonso Guajardo said he’ll know by the end of Friday ” if we really have what it takes to be able to land these things in the short run.”