SYDNEY: The Australian and New Zealand dollars were scrambling to find support on Thursday after a wave of selling overnight swamped major chart levels and took them to three-week lows.
The Aussie managed a minor lift to $0.6609, after losing 1.3% on Wednesday and breaching a retracement bulwark at $0.6626. That left its recent high of $0.6900 a distant memory and risked a return to its May low of $0.6459.
The kiwi dollar huddled at $0.6078, having shed 1.4% overnight to crack support at $0.6118. The next bear targets are $0.6031 and $0.5986.
Australia dollar tentative, awaits inflation test
The Aussie has been sold in part as a liquid proxy for the Chinese yuan, which has been in a protracted decline.
Beijing on Thursday did set a slightly firmer fix for its currency, but markets suspect it is content to allow further depreciation as a boost to exports.
The Aussie got a brief reprieve when domestic data showed retail sales rose a surprisingly strong 0.7% in May, adding marginally to the case for a further rise in interest rates from the Reserve Bank of Australia (RBA).
Other data showed job vacancies had eased again, but were still at levels that pointed to a very tight labour market.
All of which partially offset figures on Wednesday that showed a sharp slowdown in headline consumer price inflation to 5.6% in May, though core measures remained high.
The net result was that markets imply around a 36% chance of a quarter-point hike to 4.35% at the RBA’s July policy meeting next week, roughly where it was before all the data.
“We still expect the RBA to raise interest rates twice further in coming months and we see little real value from skipping July,” said Taylor Nugent, an economist at NAB. “That said, June was a finely balanced decision so a delay until August would not surprise.”
Analysts at ANZ and Westpac also expect a hike next week, while CBA is tipping a pause until August when inflation figures for the whole second quarter will be available.
Markets, and many analysts, are wagering rates will ultimately peak at 4.6% and there is little in the way of rate cuts priced in until the middle of next year.
Investors assume the Reserve Bank of New Zealand is already done at 5.5% and see little chance of an easing until April next year.
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