Daily Forex Commentary

22 December 2016 - USD edges off 14 year highs but is the Kiwi poised for deeper losses

By Matt Richardson

New Zealand Dollar:    

Much likes its antipodean counterpart the New Zealand dollar failed to mount a recovery against the week’s losses and edged lower touching intraday lows at 0.6898. With little macroeconomic data on hand technical positioning ahead of Key domestic and U.S data sets dominated the directional tone and forced the Kiwi through 5 month lows. The NZD has suffered a heavy sell off in the week following the Fed’s surprise monetary policy shift and move toward a tighter policy base and remains vulnerable to further downward moves as a bearish trading channel begins to open. With attentions today turning to 3rd quarter GDP number and key U.S macroeconomic indicators investors will be watching supports at 0.69 and 0.6845 for signs a deeper correction is at hand.

We expect a range today of 0.6840 – 0.6980

 

Australian Dollar:

The Australian dollar offered little to excite investors through trade on Wednesday failing to make significant inroads into last week’s losses and struggled to break outside a tight 40 point range. Touching intraday lows at 0.7241 the Aussie remains well supported on moves approaching 0.7230 however deeper downward corrections remain possible as a bearish trading bias appears to be forming. Concerns surrounding U.S and Chinese relations and the possible introduction of protectionist trade policies are weighing heavy on the AUD as Australian resources remain a key link in the Chinese supply chain. Further, expectations strong U.S growth and tighter monetary policy continue to promote U.S Treasury Yields and a bullish Greenback. With little macroeconomic data on hand today attentions turn to the U.S economic docket for direction amid thin holiday trading.    

We expect a range today of 0.7170 – 0.7340

 

Great British Pound:

The Great British Pound remained relatively range bound through trade on Wednesday struggling to break above 1 month lows in thin trading conditions. Having remained largely immune to swings in macroeconomic indicators investors largely ignored a marginal increase in Public Sector Borrowing instead focussing on the possibilities associated with a hard Brexit. Easing concerns throughout October and November helped the Pound hold onto gains in the face of a relentless USD rally however markets and investors seemed to finally relent last week when the Fed announced projections for 3 interest rate hikes through 2017 forcing the GBP lower. Having lost near three percent in the week to Wednesday Cable currently trades at 1.2354 having touched 1.2330 overnight. Attentions now turn to Key U.S data sets and Brexit chatter with analyst looking to PM Theresa May and any indication she will divert from her planned March implementation of Article 50 and exit negotiations.

We expect a range today of 1.7750 – 1.7950

 

Majors:

The U.S Dollar edged lower through trade on Wednesday slipping off 14 year highs as profit taking and positioning ahead of key U.S data sets dominated directional flows. With minimal macroeconomic data and a distinct lack of central bank commentary on hand to drive sentiment the Greenback suffered technical adjustments as markets prepare for U.S GDP data, durable goods orders and the holiday season ahead. Moving back below 118 JPY the USD touched intraday lows at 117.12 while the Euro found support bouncing off 14 year lows and moved back above 1.04 to touch 1.0450. The Dollar index moved a quarter percent lower through Wednesday having touched its highest level since 2002 on Tuesday. Investor’s attentions now shift to the raft of headline U.S macroeconomic indicators, while rising concerns surrounding the stability of Italian bank Monte Dei Pashchi Di Siena continue to weigh on the Euro.

 

Data releases:

AUD:

No Data

NZDGDP q/q

JPY:

No Data

GBPGfk Consumer Confidence

EUR:

German Import Prices, ECB Economic Bulletin and Italian Retail Sales

USD:

Core Durable Goods Orders, Durable Goods Orders, Final GDP q/q, Final GDP Price Index, Core PCE Price Index, Personal Spending and Personal Income.

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