SYDNEY: The Australian and New Zealand dollars paused near multi-month peaks on Tuesday after clearing another set of chart barriers to set the seal on a strong quarter, with the US currency still stuck in a broad downtrend.
The Aussie held at $0.6575, having climbed 0.7% overnight to an eight-month top of $0.6584.
The next bull target is at $0.6687, with support around $0.6510 and $0.6485.
The kiwi dollar stood at $0.6093, after finally cracking the previous $0.6088 high to a nine-month peak of $0.6099. Resistance now lies at $0.6119 and $0.6292, with support at $0.6057 and $0.6040.
The gains left the Aussie up 5.3% for the second quarter and the kiwi 7.4% higher, though the gains were mostly a function of US dollar weakness and both currencies lost ground to their European counterparts.
Policymakers at the Reserve Bank of Australia have noted the US dollar’s atypical weakness amid recent periods of risk aversion and a darkening global outlook.
This has kept the Aussie firmer than it would normally have been and limited the competitive support it provides to exports.
“Longer term, if the USD loses its safe haven status then the Aussie may fall less in times of uncertainty which will impact its role as a shock absorber for the Australian economy,” said Diana Mousina, a deputy chief economist at AMP.
“This may put more pressure on the RBA to support growth in time of global shocks.”
Minutes of the RBA’s last meeting showed the board discussed the lack of extra stimulus from the Aussie, which added to the case for a cut in rates.
The same will likely be true when the RBA meets next week and is one reason investors are pricing in a 95% chance it will cut the cash rate by 25 basis points to 3.60%.
Expectations are so strong that even an upside surprise from retail sales data due on Wednesday is unlikely to move the dial.
Median forecasts are for a rise of 0.4%, but analysts at the major local banks see a chance of a higher number based on their measures of card spending.
Growth in overall household consumption is still running well short of the RBA’s projections and supports market wagers for further easing to 3.10% by year-end, and maybe an ultimate floor of 2.85% which would put it in stimulative territory.
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