The PMI in the services sector (which, by the way, is 88% of the entire US economy) rose to 57.1% in June, significantly exceeding forecasts. New orders also increased by 61.6%, while business activity by 66%, and all this is happening against the background of an ongoing reduction in continuing staff cuts, employment by 43.5%. The latter factor constrains optimism about the US economic recovery and increases the chances of a pullback in July-August.
US stock indices continued to grow steadily. Most of the Asia-Pacific stock exchanges are in the positive zone, with the exception of the Japanese Nikkei. As of 5.30 Universal time, a positive attitude remains, which gives a chance for continued growth in oil and commodity sector currencies. The dollar is still under pressure across the entire spectrum of the market, but if its weakness was obvious a week ago, the first signs of a near reversal have appeared today.
NZD/USD
The CFTC report confirmed the trend towards the strengthening of NZD, but the growth of a long position this time turned out to be very small, and perhaps, the upward impulse shows the first signs of exhaustion. Despite this, the estimated price is higher than the spot price and is directed upwards, so the chances of testing the level of 0.6582 look high.
At the same time, a quarterly report from the New Zealand Institute for Economic Research (NZIER) showed that economic activity in New Zealand declined sharply in June. A decline in own trading activity was announced by a net 37% of enterprises, and this is the worst indicator since March 2009. A net 25% also expect a decrease in demand in the next quarter, 28% expect to reduce the number of employees, and this is also the worst indicator since March 2009.
Enterprises plan to reduce investment in both real estate and equipment over the coming year. The construction sector is most pessimistic, 75% of firms expect economic conditions to worsen in the coming months, and 61% of firms expect deterioration in the services sector. Thus, manufacturers report a decrease in both domestic and foreign demand.
There is no sign of optimism rising after the blocking mode was removed, and this is an unexpected and rather strange result of the study. ANZ Bank believes that a deep recession in New Zealand is inevitable, and there is no reason to believe that this scenario can be avoided even if the COVID is completely defeated. ANZ believes that RBNZ will increase the volume of weekly purchases under the LSAP program.
So, we can say the following on the totality of the parameters. The CFTC report still has an advantage, but the growth of a long position is slowing down. Business studies show a deterioration in economic activity and preparation for a recession, the RBNZ will increase the incentive program. All these factors are negative for the New Zealand currency, so we can assume that the upward momentum is close to exhaustion.
Testing the resistance level of 0.6583 is approaching, so for now, it is necessary to proceed from the fact that there are chances of success and the movement to 0.6750 will continue. But the scenario of the formation of a double top looks more likely, that is, the Kiwi will turn down after testing the level of 0.6583.
AUD/USD
According to the results of the meeting on Tuesday morning, the RBA left the current monetary policy parameters unchanged, the rate at the level of 0.25% at this stage looks balanced. The accompanying statement is generally kept in very cautious tones, emphasizing that there will be no tightening of policy until there is clear progress towards full employment, and inflation does not become stable in the range of 2-3%.
When this blessed time comes, the RBA does not know and does not try to predict, citing a very high level of uncertainty. The CFTC report showed that the flow of funds in AUD is declining, the growth of the estimated price is also slowing down.
The AUD/USD pair is trying to consolidate above the resistance of 0.6875, there are still chances, but they are getting less every day. If the day closes above this level, the probability of moving to the level of 0.7063 will become slightly higher, but more and more factors indicate that the Australian currency forms the top, after which a downward pullback will begin. To continue growth, positivity is necessary, which is clearly not enough.