Market Update 29/08/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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The dollar index (DXY) bounced back after hitting a 2024 low. US Treasury bonds traded within a range, and equity markets were mixed. Most European stock markets showed some gains, but US indices were weaker. The S&P 500 fell by 0.6%, the Euro Stoxx 50 increased by 0.3%, and the FTSE 100 remained flat. Meanwhile, the yield on the US 10-year bond increased by 2 bps to 3.84%.
 
Last night, the USD rebounded from its 2024 lows, making tonight’s Jobless Claims report a key focus. Any deviation from expectations could significantly impact the USD and influence market sentiment ahead of next week’s NFP report.
 
NZDUSD is slightly weaker, trading around 0.6240, down from yesterday’s 7-month high of 0.6255. In the short term, some might argue that staying above 0.6225 for a few days suggests we could target the year’s high of 0.6328. However, I believe the rates market might be a bit ahead of itself, and on a daily chart, we’re currently trading beyond 2 standard deviations. Support levels are at 0.6225, 0.6135, and 0.6065, while resistance is at 0.6270 and 0.6330.
 
NZDAUD dropped below 0.9170 but has since recovered to 0.9200. Australia’s monthly CPI indicator decreased by 0.3% to 3.5% y/y in July, largely due to government electricity subsidies, though it didn’t quite meet the expected drop to 3.4%. The absence of a clear reason for rate cuts this year led to an increase in Australian rates, and unlike the AUD, this move has held overnight. I still lean towards a downside test of this cross back towards 0.9035, but I can also see technical reasons for a potential retest of 0.9300. Both importers and exporters should watch familiar levels as we continue to trade within a long-term range of 0.9000 to 0.9500. Support is at 0.9160, 0.9090, and 0.9035, while resistance is at 0.9230, 0.9260, and 0.9300.
 
NZDGBP has risen to 0.4730 as GBP has underperformed along with other European currencies.
 
NZDEUR has finally broken through 0.5525, reaching a 6-week high and reclaiming the 0.5600 level. Although softer European data over the past few months should have pushed this pair higher, recent statements from the ECB Governing Council have left the market uncertain about how much Europe will actually cut rates. It’s also worth noting that risk reversals for EURUSD have reduced the bullish EUR outlook, with the one-week risk reversal now at 0.21% favoring calls, down from 0.52% on Monday, bringing it back to levels seen before the Jackson Hole meeting. Support levels are at 0.5525, 0.5465, and 0.5425, while resistance is at 0.5660, 0.5700, and 0.5725.
 
Looking ahead, the ANZ business outlook survey will be released at 1:00 pm. Later tonight, we have the German CPI, but the main focus will be on US data, including GDP, Personal Consumption, and Jobless Claims. After Jackson Hole, Jobless Claims are likely to be important.
 


Here are the latest mid-market rates: