Thursday was largely a session to forget, but we saw some movement in the commodity based currencies, with the NZD bid up on the RBNZ optimism over the domestic outlook and the CAD turning tail back through 1.3300 after the April retail sales figures rose significantly more than expected.
The key focus on NZD was the relationship with the AUD, where the cross rate is grappling with the tech base support coming in on the weekly rising trend line below 1.0400, with 1.0350-1.0390 the area to watch. Price action here is familiar to current market practice, grinding away at key levels and looking for the break. Should we extend through this level, 1.0250-1.0300 is the next contentious area, and this aligns with 0.7270-80 and 0.7330-50 in the NZD/USD rate – the former area containing for now.
AUD/USD has been pressured as the NZD spot rate looks well capped, but support here strong into the lower 0.7500’s.
We highlighted the USD/CAD interest to sell above 1.3300 through the earlier part of the week, strengthening as we get to closer to the 1.3370 level. However, we got nowhere near this today before the strong consumer data for Canada reverted focus back onto domestic economics. More to consider Friday as the latest (May) CPI stats are due for release. In the meantime, we expect range traders will limit this latest pullback with bids either side of 1.3200.
Looking at the general theme for Friday, both manufacturing and services PMIs are due out in Europe and the US. There will have to be a notable disparity between the two in order to break the range in EUR/USD, where on the downside, players continue to fade weakness ahead of 1.1100. From a technical perspective, the constant pressure will eventually tell, but US Treasury yields are doing the USD few favours at the moment as some of the hawkish tones from the Fed are being met with scepticism until the data tells otherwise.
USD/JPY falters close to 111.00 as a result, having dipped briefly under this level, but by a meagre 5 ticks as yet. Japanese manufacturing PMIs also set for release in the overnight session ahead.
Finally, cable now looks to have found its near term ‘value’ level, gyrating in the mid 1.2600’s as the market tries to gauge how the latest developments in parliament – and the House of Lords according to reports – will impact on the Brexit approach going forward. Aside the pressure from the opposition parties to tame down her tone and stance on the EU talks, Theresa May has also faced hostility within Tory ranks, and this has all served to suggest a greater likelihood of a softer Brexit, and hence the resilience in GBP. EUR/GBP sellers ahead of 0.8850 hold their ground, but either side of the market, we are consigned to watching the headlines for more significant ‘ingredients’ in the mix.