AUD/NZD looks ready to extend a short-term downtrend!
Will Australia’s labor market data drag the pair to new intraweek lows?
Before moving on, ICYMI, yesterday’s watchlist looked at GBP/JPY’s upside breakout opportunity after the U.K. printed its labor market data. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. headline inflation eased on both monthly (0.5% to 0.4%) and annual (6.4% to 6.0%) bases in February, but the lack of upside or downside surprise kept the markets’ attention on SVB contagion.
OPEC raised its China demand forecasts but kept its global growth estimates for 2023
Saudi Arabia’s energy minister Prince Abdulaziz bin Salman: OPEC+ alliance will stick to October output cut deal until the end of 2023.
New Zealand’s current account deficit widened from 21.1B NZD in 2021 (6% of GDP) to 33.8B NZD for the year ended 2022 (8.9% of GDP), the highest since the series began in 1988.
API: U.S. crude oil inventories saw a 1.155 million barrel build but products like gasoline and distillates fell in the March 10 week
BOJ meeting minutes showed members debating making further tweaks to its YCC program but deciding to wait and see for now
S&P: New Zealand’s AA+ and AAA credit grades could come under pressure if the nation’s account deficit remains “extremely high” over the next 12 to 18 months
China’s fixed asset investment rose by 5.5% in January and February combined, higher than the expected 4.4% growth and 2022’s full-year growth rate of 5.1%.
China’s retail sales improved by 3.5% y/y as expected in the January-February period, marking the first growth in three months and the fastest since August 2022
China’s industrial output accelerated from 1.3% to 2.4% y/y in January-February, disappointing estimates of a 2.6% uptick
China’s urban unemployment rate ticked higher from 5.5% to 5.6% y/y in February, the highest since November
U.K. to extend energy price cap by three months to the end of June
Price Action News
Asian session traders tracked the relief rally vibes from the U.S. session after Uncle Sam’s inflation numbers supported a less hawkish Fed decision next week.
NZD even broke above the U.S. session highs after China’s data dump showed improvements in investment and consumption for the world’s second-largest economy.
The party didn’t last long, however. New Zealand’s “extremely high” current account deficit release prompted a warning from credit ratings agency S&P that the country’s AA+ and AAA credit ratings could take hits if the country doesn’t improve its spending gap.
NZD not only erased most of its intraday gains, it also started European session trading near its U.S. session lows.
Canada’s housing starts at 12:15 pm GMT
U.K.’s annual budget release at 12:30 pm GMT
U.S. retail sales at 12:30 pm GMT
U.S. PPI reports at 12:30 pm GMT
U.S. NAHB housing market index at 2:00 pm GMT
NZ quarterly GDP at 9:45 pm GMT
Japan’s core machinery orders at 11:50 pm GMT
Japan’s trade balance data at 11:50 pm GMT
Australia’s labor market numbers at 12:30 am GMT (Mar 16)
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I don’t know if you noticed but AUD/NZD resumed its downtrend at the start of the month and has been trading an observable descending channel pattern since last week.
What makes AUD/NZD’s chart more interesting today is that it just bounced from the channel’s resistance.
More importantly, the rejection happened right around the (a) 1.0750 psychological handle (b) the pair’s 60-pip full ATR, and (c) the 61.8% Fibonacci pullback of yesterday’s upswing.
Coincidence? I think not!
The upcoming New Zealand quarterly GDP release and Australia’s labor market data might make or break AUD/NZD’s short-term downtrend.
Markets expect New Zealand’s economy to have contracted by 0.2% in Q4 after a 2.0% growth in Q3. Meanwhile, Australia may see a strong rebound in hiring in February.
If the reports print in AUD’s favor as markets are expecting, then AUD/NZD could retest the channel resistance above 1.0750 or even its intraweek highs near 1.0780.
But if the next sessions’ headlines highlight the Reserve Bank of Australia (RBA)’s relatively less dovish biases, then AUD/NZD could maintain its weeks-long downtrend and dip back to the 1.0725 or 1.0700 previous areas of interest.