SYDNEY: The Australian and New Zealand dollars gained on Friday as an overnight bounce in the US currency faded, but they still face some heavy resistance levels that have kept them mostly range-bound.
The Aussie rose 0.4% to $0.6437, recouping all its overnight losses, and is set to end the week up 0.5%.
It faces some stiff resistance at $0.6450 and $0.6500/6515, while support is solid at $0.6360.
The kiwi inched up 0.3% to $0.5917, having lost 0.7% overnight and bringing the weekly rise to 0.6%. It stayed corralled in a range of $0.5847 to $0.6029 that has held for the past month.
The US dollar bounced overnight partly due to the passage of President Donald Trump’s bill for huge tax and spending cuts by the House of Representatives, but the lift proved short-lived on Friday as investors stayed bearish about the fate of the dollar.
More analysts are turning bullish on the Australian dollar.
“The worst of the external backdrop for AUD looks to be passing,” said Lachlan Dynan, a macro strategist at Deutsche Bank.
“China’s credit impulse is around its highest in four years and the fiscal impulse has lifted. Combined with the US-China climbdown on tariffs, the outlook for AU export demand looks better than many had feared,” he added.
“The more dovish RBA shouldn’t hamper AUD.”
New Zealand dollar struggles as tight budget signals more policy easing
On Thursday, the Reserve Bank of Australia’s deputy governor, Andrew Hauser, said Australian exporters were upbeat on the business outlook in China, despite the trade war. Governor Michele Bullock will visit China next week to meet her counterparts.
The coming week is set to be busy for the two Antipodeans, with the Reserve Bank of New Zealand’s policy meet on Wednesday, at which it is widely expected to cut its Official Cash Rate (OCR) to 3.25%, though uncertainty remains about its next moves.
Australia will see the release of data on monthly CPI on Wednesday and retail sales on Friday, which have gained more importance after its central bank opened the door to further policy easing.
A rate cut in July is now priced at a 60% probability, with a total easing of 65 basis points expected by year-end.
Local bond markets, which have cheered the RBA’s pivot, are set for bumper gains this week.
Australian three-year government bond yields fell 13 bps in the week to 3.499%, their biggest weekly drop since early April.
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