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New Zealand dollar was the strongest major currency last week, refusing to follow Australian dollar lower, as it usually does. NZD/USD corrected 38.2% of the 550-pip sell-off in April and May. Where to from here depends, as always, on U.S. dollar and risk sentiment. All things being equal, the pair could be headed to retest 0.715 area in the days/weeks ahead.
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Risk sold ahead of G7 meetings
With G7 meetings later today and tomorrow, we are seeing some profit taking in risk sensitive instruments. GBP/JPY bounced off of 100 WMA near 143.30 and rallied 500 pips, retracing three quarters of the decline in May, before turning lower. AUD/USD is also off a cent after testing 0.77 earlier this week.
Australian dollar supported after solid labour market data
Australian dollar has been on of the more resilient currencies of late. Labour market report today and wage price index a day earlier were fairly solid, giving it further support. AUD/USD is back above 0.75 and appears ready to take out last week's high. Not out of the woods yet but the pair could be on the way to 0.765. As always with this pair, much depends on the U.S. dollar and risk sentiment.
USD/JPY poised to extend gains, barring any shocks
It appears that the tide has turned in USD/JPY. While the pair is likely to fall further over the longer-term, shorter-term path of least resistance is to the upside. However, there are several themes going on (trade wars, Syria, increased stock market volatility), that have potential to escalate quickly, and lead to a substantial leg to the downside.
NZD/USD setting up for the next leg
Kiwi dollar has so far been the best performer this week, though it pared some if the gains yesterday and tonight. NZD/USD is still trading in a sideways consolidation between, roughly, 0.715 and 0.735. If risk sentiment holds, I don't think it will be long before the pattern resolves to the upside.
USD/JPY firmer as risk sentiment improves
Risk sentiment improved yesterday with some positive trade headlines. Markets are probably growing a bit tired of this theme and, without some kind of escalation, its impact will start to fade. USD/JPY is bumping into 50 DMA, a part of the wider 107 - 107.5 resistance area. A weekly close above this area would be bullish.
USD/JPY breaks below 105.30
USD/JPY finally broke below 105.30 support in thin conditions. Trump's tariffs spurred some retaliatory measures from China, which has not helped risk sentiment and the pair. The decline has been orderly so far but I'm sure BOJ officials are near their screens, and phones. 105 - 105.30 should now act as a resistance. 102.5 - 103 is the next target.
NZD/USD trading in a range
New Zealand GDP for Q4 2017 came in weaker than estimated. NZD/USD fell about 30 pips ahead of and after the release but retraced that in the following hours. The pair's been quite resilient even amidst wobbly risk sentiment of late, mostly owing to U.S. dollar weakness. 0.72 - 0.74 range in play still. A successful break could see 200 pips in either direction.
NASDAQ to all-time highs, S&P500 and Dow strong
NASDAQ hit a new all-time high last week. S&P500 and Dow are still trading well below their respective highs but posted a strong weekly close. Relaxation of the new trade tariff terms by the U.S. and North Korean steps toward denuclearization have been a real boost to risk sentiment. That said, I continue to believe that we'll see SP500 at 2500 before 3000, especially if U.S. treasury yields keep rising.
EUR/JPY bounces on technicals and improved risk sentiment
EUR/JPY posted a key reversal on the daily chart yesterday, after trading to the lowest level since last August and touching 50 and 200 WMA. The first average is about to cross above the second one, a.k.a. the golden cross. While I expect euro to remain supported, much will depend on yen. If we do get a deeper retracement, I'd expect 133 - 134 to cap it, at least initially.