Investors’ Morale Stays Sanguine, RBNZ Pushes Kiwi Down

Equities Gain as Investors Stay Optimistic Over a Global Recovery

The dollar traded lower against all but two of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It underperformed the most against NOK, SEK, JPY and EUR in that order, while it eked out little gains only versus CAD and NZD.

AUD/JPY — Technical Outlook

Looking at the technical picture of AUD/JPY on our 4-hour chart, we can see that it is balancing above a short-term tentative upside support line taken from the low of May 15th. In addition to that, on Monday, the rate broke above a short-term downside resistance line taken from the high of June 8th. All this still keeps the upside scenario on the table, however to get a bit more comfortable with higher areas, we would prefer to wait for a clear push above the 74.30 barrier, marked by the high of June 17th and near yesterday’s intraday swing high. Until then, we will take a somewhat bullish approach.

RBNZ Continues to See Downside Risks

Despite the broader market optimism, the Kiwi was among the two currencies that underperformed against the greenback, and that’s mainly due to the RBNZ decision during the Asian session today. The Bank kept interest rates and its Large Scale Asset Purchase (LSAP) program unchanged, with officials noting that their nation has contained the spread of the virus, enabling an earlier resumption of economic activity than assumed in May. However, they highlighted that the appreciation of their local currency has placed further pressure on exports and that the balance of economic risks remains to the downside, adding that they remain willing to ease their policy further if deemed necessary.

NZD/USD — Technical Outlook

Although NZD/USD drifted lower yesterday, the pair still remains above its short-term tentative upside support line taken from the low of May 15th. If the rate continues sliding a bit more, it may end up testing that upside line, which if stays intact, could be a good area for the bulls re-enter the field. For now, we will stay somewhat positive and carefully observe the behaviour of the pair near that upside line.

As for Today’s Events

During the European morning, we get the German Ifo Survey for June. Expectations are for both the current assessment and expectations indices to have risen to 84.0 and 86.0 from 78.9 and 80.1 respectively, something that will drive the business climate index up to 85.0 from 79.5. That said, bearing in mind that both the current conditions and economic sentiment indices of the ZEW survey increased by more than the estimates suggested, we would consider the risks surrounding the Ifo forecasts as tilted somewhat to the upside. This could add to speculation that Eurozone’s economic powerhouse is on a recovery track, and may thereby keep the overall market appetite supported.



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