FX Commentary – NZ Dollar Declined On Prolong Low Interest Rate Outlook

Market Talk

– The dollar hovered below recent peaks on Tuesday as investors looked to U.S. policymakers for clues on whether they may seek to slow rising yields, while the New Zealand dollar dropped after housing reforms cooled policy-tightening expectations.

– The New Zealand dollar hit a three-month low after the government introduced taxes to curb housing speculation, a move investors reckoned could allow the central bank to hold interest rates lower for longer with less risk of a property bubble.

– Germany is extending its lockdown until April 18 following a third wave of European COVID-19 cases with a highly contagious variant. Paris and surrounding areas entered a four-week lockdown during the previous week, and Germany extended its lockdown until Apr. 18

– Sterling slipped to $1.3845 and oil linked currencies also fell with crude prices on worries that a new wave of infections will bring more lockdowns in Europe. The Canadian dollar dipped to C$1.2544 per dollar

– Gold was down on Tuesday morning in Asia as the dollar strengthened despite a dip in the U.S. Treasury yields offering little respite after U.S. equities gained, and fresh COVID-19 restrictive measures were introduced across Europe.


Chart Focus AUD/JPY
Key Points
1. Sell AUD/JPY recommendation.
2. Sell AUD/JPY at 83.70. Stop at 84.15 and target at 82.80.
3. Lockdown in Europe and housing curb in New Zealand are both likely to weigh on the Aussie dollar.
4. A bearish Flag chart pattern and bearish MACD are both hinting of a bearish price trend.

Fundamental Comments
1. Lockdown in Europe is likely to weigh on riskier currency Aussie and favours the safe haven yen.
2. New Zealand’s curb on housing speculation is likely to weigh on the Aussie dollar.

Technical Comments
1. Price has formed a bearish Flag chart pattern which is hinting of a bearish price trend ahead.
2. MACD is bearish and is hinting of a bearish price trend ahead.

Key Levels

Support83.4582.9582.40
Resistance83.7584.1584.55

Technical Overview

EUR/JPY – We had a sell recommendation yesterday but our position was stopped out with a loss of 35 pips. Stochastic is near to the overbought zone but MACD remains bearish. 20EMA is flat and is not giving any clues at the moment. We remain bearish on this pair. We think price may have made a high and we see price going lower to 128.80 in the next couple of days.

Support129.50128.95128.60
Resistance129.85130.25130.60

EUR/USD – Price has rallied from Friday’s low of 1.1873 to a high of 1.1946 this morning but the rally seems to have run out of steam. Stochastic is still rising but MACD remains bearish. However, 20EMA is bullish. We are looking at another decline to 1.1835 in the next few days. A move above 1.1995 would negate our bearish view.

Support1.19151.18701.1835
Resistance1.19501.19901.2035

GBP/USD – Price has declined to 1.3820 this morning, which was just above the Double Tops chart pattern’s neckline. A break of the neckline at 1.3810 is likely to trigger a price move to 1.3615 over the next 3-4 weeks. 20EMA is hinting of a bearish trend and MACD is also bearish and moving lower, hinting of a bearish trend ahead. Stochastic is close to the oversold zone with a strong bearish trend, Stochastic is likely to stay near to the oversold zone.

Support1.38101.37751.3745
Resistance1.38401.38751.3905

XAU/USD – Gold had rallied on the back of Powell’s dovish comments to a high of $1755.35 on Thursday morning but has not been able to build on its gains. Price had declined to a low of $1718.90 and price looks likely to trade within this range of $1755 to $1718 for the next couple of days. The break of either range will likely determine the next immediate direction.

Support1727.051718.901706.10
Resistance1740.751755.351766.90

NZD/USD – Price has broken below 0.7098 on the back of a tax to curb housing speculation. A break of this support is likely to send price to the next support at 0.7000. A longer term decline could see price moves to 0.6870. MACD is bearish and is declining. 20EMA is also bearish. Stochastic is near to the oversold zone but with a strong bearish trend, Stochastic is likely to stay near the oversold zone for a longer period of time.

Support0.70600.70300.6995
Resistance0.71000.71400.7185

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