Forex News and Events
New Zealand’s trade surplus increases
New Zealand’s trade surplus surprised substantially to the upside in April, printing at NZ$292mn, while the market was expecting a figure closer to NZ$25mn. Exports rose 4% - or $166mn - compared to 12 months ago, to reach $4.3bn in April. The sharp increase in fruit exports (+16%y/y) help to offset the contraction of the largest export commodity group - milk products, milk powder, butter and cheese - which has contracted 6.7%y/y since April 2015 amid global dairy oversupply.
On the other side, imports remained roughly stable as it increased by 1.5%, up to $3.98bn, compared to 12 months ago as crude oil and industrial supplies imports shrank, which is typical of reluctance of companies to invest in the context of this highly uncertain economic backdrop.
Overall, the data suggested that the market underestimated the ability of the New Zealand economy to weather the turmoil of the dairy sector. NZD stabilised at around 0.6745 against the USD with traders preferring to remain sidelined ahead of next month’s FOMC meeting. We continue to expect further strength of the Kiwi against the Aussie as the Australian dollar will continue to suffer due to the country’s exposure to Chinese demand. Our next target is 1.05.
Kuroda ready to act, once again
BoJ Governor Kuroda, in a speech held at the Japan parliament this Wednesday, confirmed that further stimulus will be added “without hesitation” if the yen strengthens too much. He said that it would threaten the country’s objective of reaching the BoJ’s inflation target of 2% over the medium-term.
For the time being, financial markets do not know which price will trigger an intervention from the BoJ. Yet we believe that this trigger is not very far away from current prices and should lie around 106/107 yen for a single dollar note. Nonetheless, we feel that the BoJ will likely try to avoid additional stimulus and that the price of the yen is only a central bank indicator at which the situation is not sustainable. From our vantage point Kuroda’s declaration was a simple verbal intervention. We do not believe that Japan is satisfied with heaping on even more stimulus.
On support of our view, the most recent CPI data printed at -0.3% y/y so following Kuroda’s comments, fresh stimulus should be added today as there are already massive downside pressures on inflation. However it is true that the JPY is taking a small breath against the US dollar on renewed likelihood of a June Fed rate hike. Unfortunately for Japan those hopes won’t last long, US economy is also suffering, and bearish pressures on the USD/JPY will soon be back before the BoJ will be forced to intervene in a never-ending monetary policy.
The Risk Today
EUR/USD keeps on declining and has broken hourly support at 1.1144 (24/03/2016 low) while hourly resistance is located at 1.1227 (24/05/2016 high) and 1.1349 (17/05/2016 high). Stronger resistance lies at 1.1616 (12/04/2016 high). The technical structure suggests further downside moves. In the longer term, the technical structure favours a very long-term bearish bias as resistance at 1.1714 (24/08/2015 high) holds. The pair is trading in range since the start of 2015. Strong support is given at 1.0458 (16/03/2015 low). However, the current technical structure since last December implies a gradual increase.
GBP/USD is trading higher. Hourly support is given at 1.4404 (15/05/2016 low) while hourly resistance can be found at 1.4663 (19/05/2016 high). Stronger resistance is located at 1.4770 (03//2016 high). Expected to show continued strengthening toward resistance at 1.4663 as the pair lies within an uptrend channel. The long-term technical pattern is negative and favours a further decline towards key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.
USD/JPY is trading around 110. Selling pressures look significant around this level. Strong resistance is given at 111.91 (24/04/2016 high) while hourly support lies at 108.72 (18/05/2016 low). Expected to show further weakening towards 108.72 as the medium term momentum is oriented downwards and the technical structure suggests a further strong bearish move. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).
USD/CHF has broken symmetrical triangle. Hourly resistance can be found at 0.9938 (24/05/2016 high) while hourly support is given at 0.9883 (06/05/2016 low). Expected to show further bearish consolidation move. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias since last December.
