RBNZ Expands Stimulus, AU Employment Report in Focus

EQUITIES SLIDE AS RISK APPETITE SOFTENS

The US dollar traded higher against all the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained the most versus NZD, AUD, and JPY in that order while it eked out the least gains against CAD.

RBNZ EXPANDS BOND-BUYING

Back to the currencies, apart from the switch in the broader market sentiment, the Kiwi was also beaten by the overnight monetary policy decision of the RBNZ. The Bank decided to keep its Official Cash Rate (OCR) unchanged at 0.25%, but expanded its Large-Scale Asset Purchase (LSAP) program up to NZD 100bn from NZD 60bn, adding that a package of additional monetary instruments must remain in active preparation, including a negative OCR and purchases of foreign assets. Although they acknowledged that New Zealand had contained the spread of the coronavirus locally, they noted that the global economic disruption caused by the pandemic is persisting, and that’s why there remains a downside risk to their baseline economic scenario.

NZD/USD — TECHNICAL OUTLOOK

After hitting the 0.6715 barrier on the last day of July, NZD/USD started moving lower. Yesterday, the pair broke one of its key support areas, at 0.6575, this way confirming a lower low, which may invite more sellers into the game. At the same time, the rate is trading below a steep short-term tentative downside line taken from the high of August 8th. If the pair struggles to break that downside line, the near-term outlook could remain bearish for a while.

AUD-TRADERS LOCK GAZE ON JOBS DATA

As for tonight, during the Asian morning Thursday, Australia’s employment report for July is coming out. The unemployment rate is forecast to have risen to 7.8% from 7.4%, while the net change in employment is anticipated to show that the economy has added 40.0k jobs after gaining 210.8k in June.

AUD/CAD — TECHNICAL OUTLOOK

AUD/CAD continues to drift lower and at the time of writing, it is trading slightly below the 200 EMA on our 4-hour chart. In addition to that, the rate is also running below a short-term tentative downside resistance line taken from the high of August 7th. At some point in the very near future, there is chance we may see a correction higher, however, if the pair stays below that downside line, we will remain bearish.

AS FOR THE REST OF TODAY’S EVENTS

Ahead of the EU open, we already got the 1st estimate of the UK GDP for Q2, as well as the nation’s industrial and manufacturing production rates for June. Economic activity in the UK tumbled 20.4%, which is marginally better than the -20.9% forecast, something that took the yoy rate down to -21.7% from -1.7%. Both the IP and MP rates increased to 9.3% and 11.0% from +6.2% and +8.3% respectively.

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