Daily Report: Kiwi Lifted by Unexpected Trade Surplus, Aussie and Loonie Recovered
Commodity currencies recovered today partly thanks strength in gold and crude oil. Kiwi jumped strongly after trade balance unexpectedly showed NZD 486m surplus in December comparing to expectation of NZD -105m deficit. That was indeed the largest surplus figure since 1991. Imports dropped -19% from a month earlier to NZD 3.58 comparing to a solid 6.2% rise in exports to NZD 4.07b. And the large fall in imports was seen as mainly due to a crop in crude oil imports and thus, was not taken as a sign of domestic demand weakness. RBNZ is going to meet this week and is widely expected to keep rates unchanged at 2.50%. Indeed, markets are generally expecting RBNZ to be on hold for the rest of the year.
Technically, NZD/USD has been stuck in range of 0.8155/0.8475 since early December. Larger rally from 0.7457 might extend further but it's been clearly losing momentum. Also, such rise is seen as the third leg of consolidation pattern from 0.7370 and 0.8469 resistance was already breached. We'd believe that upside potential for NZD/USD is limited as strong resistance, even in case of another rise, should be seen from upper channel (now at 0.8598). Reversal risk is also high at this point and a break of 0.8155 support will turn outlook bearish for 0.7370/7457 support zone.
Aussie was also give a small lift by NAB business confidence data which rose from -9 to 3 in December. However, NAB is skeptical on whether the "feeling of relative optimism will be sustained into the New Year". And it's actually still remain well below its long term average of +5. NAB tipped that RBA could lower interest rates by another 75bps this year and the economic grow falls below trend. It's expecting rate cuts in February or Mar, May and August. Conference board leading indicator dropped -02.% in November. Technically AUD/USD is trading below 1.0467 minor resistance in spite of today's recovery. And we'd stay cautiously bearish and expect further dip to 1.0344 support within this week. EUR/AUD is also expected to challenge 1.3 psychological level soon.
Other data released so far saw German Gfk consumer sentiment improved slightly more than expected to 5.8 in February. Looking ahead,, S&P Case-Shiller 20 cities price index is expected to show 5.6% yoy rise in November. But the main focus is on consumer confidence which is expected to drop slightly to 64 in January.
AUD/USD Daily Outlook
Daily Pivots: (S1) 1.0391; (P) 1.0410; (R1) 1.0436; More...
AUD/USD made a temporary low at 1.0384 and recovered. Intraday bias is turned neutral first. Nonetheless, with 1.0485 minor resistance intact, deeper decline is still expected. As noted before, corrective rise from 1.0148 should have already finished at 1.0597. Below 1.0384 will target 1.0344 support first. Break will confirm this bearish case and target 1.0148 support and below.
In the bigger picture, price actions from 1.1079 high are treated as a consolidation pattern in the larger up trend, in form of a triangle. Fall from 1.0624 is viewed as the last leg inside the pattern and could extend lower. But downside of the fall from there should be contained above 0.9588 and the larger up trend is ready to resume soon. Break of 1.0624 should send AUD/USD through 1.0852 to retest 1.1079 resistance next.
Economic Indicators Update
||Trade Balance (NZD) Dec
||Conference Board Leading Index Nov
||NAB Business Confidence Dec
||German GfK Consumer Sentiment Feb
||S&P/Case-Shiller Composite-20 Y/Y Nov
||Consumer Confidence Jan
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