Yen continues to trade broadly lower and the weakness is lifting Nikkei mildly. At the time of writing, USD/JPY is trading steadily above 111 handle while Nikkei is up 0.5%. Expectation of rate hike by Fed in June or July is certainly giving USD/JPY a lift. But the broad based weakness in the Japanese currency is more likely due to speculations of additional easing by BoJ this year. The central bank is still rather distant from meeting its 2% inflation target. Economic data from Japan were slightly better than expected by there is no support to Yen so far. Unemployment rate was unchanged at 3.2% in April versus expectation of 3.2%. Household spending dropped -0.4% yoy versus expectation of -0.6% yoy. Industrial production rose 0.3% mom versus expectation of -1.4% yoy.
Released from Australia, building approvals rose 3.0% mom in April versus expectation of -2.8% mom fall. Current account balance narrowed slightly to AUD -20.8bn in Q1 versus expectation of AUD -19.3b. New Zealand NBNZ business confidence rose to 11.3 in May, building permits rose 6.6% mom in April. Aussie has been weak against Kiwi for some time and has indeed found a bottom after the surprised RBA rate cut earlier this month. Both RBA and RBNZ are expected to deliver more rate cuts this year. RBNZ could cut OCR again as soon as in June by another 25bps to 2.25%. Meanwhile, there are speculations that RBA could deliver as many as two 25bps cut this year, one in August and one by the end of the year, to bring the cash rate down to 1.25% new low. While, there Kiwi might underperform Aussie in near term, there is prospect of more comparative weakness in Aussie in medium term. The risks are that RBNZ surprised market with no cut in June. And speculations for two cuts by RBA intensifies.
Looking ahead AUD/NZD, the price actions from 1.1638 are seen as a consolidative pattern with fall from 1.1331 as the first leg. A near term bottom is in place at 1.0617 earlier this month and some more consolidations would be seen. But near term outlook will stay bearish as long as 1.0918 resistance holds and AUD/NZD should at least have a test on 1.0494 before the consolidative pattern finished. There is prospect of hitting as low as 100% projection of 1.1638 to 1.0494 from 1.1331 at 1.0187 before bottoming.
Elsewhere, the economic calendar is rather busy today. Eurozone will release CPI flash, unemployment rate and M3. German unemployment will also be featured. Canada will release GDP later today. US will release personal income and spending, S&P Case Shiller house price, Chicago PMI and consumer confidence.