KIWI DROPS AFTER THE CENTRAL BANK CHANGES TUNE
The New Zealand dollar fell today against the US dollar to the lowest level since August last year after the central bank released a dovish statement. The bank left interest rates unchanged at 1.75% and announced that the rate was likely to remain at this level until 2020. This dovishness was a deviation from the hawkish statement the bank released during their previous meeting. In recent weeks, the country has released disappointing economic data, with unemployment moving up, inflation remaining low, and the GDP numbers for the second quarter disappointing.
Asian stocks ended the day in the green after China announced retaliatory tariffs against the US. Yesterday, the country released a list of items they plan to place a 25% tax on, further escalating the trade war initiated by the US. Asian stocks shrugged these concerns aside as US investors did yesterday as the major US indices ended the day higher. The Shanghai Composite index and the Hang Seng ended the day at 1.80% and 0.90% respectively. In Europe, the major indices declined today with the DAX, Stoxx, and the CAC falling by 0.20%, 0.25%, and 0.35% respectively.
The euro was little moved today after the European Central Bank released the economic bulletin. The bulletin noted that the EU economy was growing, albeit at a slower pace than that of 2017. The bulletin also highlighted the potential risk to the EU economy especially because of the current impasse on trade and the loss of momentum on the global trade indicators. Problems faced by emerging markets were also highlighted as being potential risk factors for the EU economy. On inflation, the bulletin noted that the HICP inflation had reached the 2.0% target in June mostly because of higher energy prices. Overall, the statement restated the ECB’s guidelines on winding down the asset purchases in December and hiking interest rates at the end of the summer.
The dollar index was slightly higher today after the data from the labour department showed falling initial jobless claims. The claims reported today were at 213K, which was lower than the expected 220K and last week’s 219K. The continuing jobless claims rose to 1.755 million compared to the expected 1.754 million. Still, jobless claims are in the lowest levels for decades, which reflects the tightening labour market. In addition, the PPI numbers released by the Labour Department disappointed. The PPI in June rose at an annualized rate of 3.3% which was lower than the expected 3.4%. On a MoM basis, the PPI growth rate was unchanged.
The EUR/USD pair was little moved today and is trading at 1.1596 level, which is slightly higher than Tuesday’s low of 1.1530. On the hourly chart, the pair is between the lower and middle Bollinger Band levels. As shown below, the pair has formed a symmetrical triangle pattern. This means that the pair could remain in this range as traders wait for the CPI numbers from the United States which will be released tomorrow.
The kiwi fell sharply against the dollar after the dovish statement by the RBNZ. The pair reached an intraday low of 0.6638, which is the lowest level since last year. This price is below the 100 and 200-day moving averages. As the pair declined, it crossed the important support level of 0.6710. Its RSI on the hourly chart below is at 25. Nonetheless, as the RBNZ keeps interest rates low, there is a likelihood that the pair will continue moving lower.
On Wednesday last week, the USD/JPY pair reached a high of 112.14. It then started declining and today, it reached a low of 110.70. As shown below, as the pair declined, it formed an equidistance channel of strong support and resistance levels. The current price is below the 50 and 100-day EMAs and is below the resistance level of the channel. As traders wait for the CPI data from Japan and US tomorrow, the pair will likely remain within this channel.