Daily Market Report: Interest Rate Hikes Could be Slowing New Zealand Business Hiring

Yesterday, the EURUSD registered another fresh yearly low (1.3357). The pair declined by around 60 pips following the news that June’s EU Retail Sales narrowly missed expectations. On a monthly basis, Retail Sales increased by 0.4% slightly below the 0.5% expected. The news that United States Factory Orders rose by 1.1% in June, as well as the ISM Non-Manufacturing Composite surpassing expectations contributed to the EURUSD failing to recover losses later in the afternoon.

Today, a wide variety of EU economic data is released. This includes the latest German Factory Orders, Markit German Construction PMI and Markit Euro-Zone Retail PMI. The former should potentially be considered as having the highest risk to the EURUSD valuation. It has appeared that the German economy has been a casualty of the geopolitical tensions in Eastern Europe. This has been suggested after recent German Factory Orders declined, alongside German IFO data missing expectations. Potential EURUSD support levels can be found at 1.3341 and 1.3317.

Moving on to the Cable, there were further indications of the GBP bulls attempting to regain momentum on Tuesday. Tuesday’s UK Services PMI was announced at a nine-month high. Considering the UK services sector represents around 70% of the UK GDP, this was reacted to bullishly. Yesterday’s impressive Services PMI followed Monday’s Construction PMI surpassing expectations. The GBPUSD concluded the day’s trading at 1.6684, around 40 pips higher Tuesday’s low (1.6844).

The latest annualised Industrial Production and Manufacturing Production data from the United Kingdom is announced at 11.30 GMT. The manufacturing sector has previously been pinpointed as a potential target for UK job growth, so this could potentially be a release for traders to look out for. The current expectations for Manufacturing Production are an annualised 2.1%, alongside a 0.6% monthly gain. GBPUSD resistance levels can be found at 1.6882 and 1.6913. If the financial markets react to the data unfavorably, support is located at 1.6845 and 1.6816.

The USDJPY progressed after the better than expected US economic releases, but again failed to rise above the psychological 103 resistance area. The USDJPY spiked as high as 102.917, before closing at 102.586.

With exception of the latest US Trade Balance release, economic data for this pair is slightly lower today. After failing to pull away from the 103 area for the fourth time within a week, this can be seen as a ceiling for the pair. Support can be found at 102.445, 102.335 and 102.070. Resistance remains at 102.636, 102.798 and what appears to have become a ceiling for this pair, 103.

The AUDUSD pulled back yesterday, declining by around 40 pips before concluding trading 0.9303. This could be due to the Reserve Bank of Australia’s (RBA) Monetary Statement in the early hours of Tuesday morning reaffirming that interest rates will remain unchanged for some time.

In the early hours of Thursday morning, the latest Australian Employment Report is released. This represents a high risk to the Aussie. Reason being, the Australian economy remains under pressure to move away from mining/export reliance and transition towards domestic consumption. It is probable that investors will be looking into the employment report and trying to decipher whether job growth is rising within domestic sectors. If the markets react favorably to the report, resistance is located at 0.9341 and 0.9341. Support can be found at 0.9289 and 0.9275.

Finally, the NZDUSD declined by around 60 pips yesterday, before concluding trading at 0.8450. There was a mixed reaction to New Zealand’s latest employment report. On one hand, the unemployment rate decreased to its lowest level in five years, 5.6%. On the other hand, less jobs were created than the previous quarter, and this sent the NZDUSD lower. Data from Statistics of New Zealand indicated that employment rose 0.4% in the second quarter, less than the 0.9% in Q1 and the 0.7% expected.

This suggests that after four consecutive interest rates from the Reserve Bank of New Zealand, hiring is slowing down and higher rates appear to be having an effect on business expenditure. This will provide further reasons for the New Zealand Central Bank to pause monetary tightening, which should be send the NZDUSD lower as trading today commences. Upcoming NZDUSD support can be found at 0.8428 and yesterday evening’s two-month low, 0.8421.

About the Author
Jameel Ahmad is the Chief Market Analyst at Forex Time (FXTM). He holds a BA (Hons)degree in Business Studies with Accountancy & Finance from the University of the West of England, Bristol, UK. In his early career, Jameel worked on a variety of projects in the Middle East, Europe and United States, which allowed him to develop a detailed understanding of banking, international finance and asset management. Later on he worked as a strategic research analyst for an international brokerage firm, where he gained invaluable experience in writing FX commentaries and fundamental analysis on distinguished financial websites.

Leave a Reply