On Tuesday, US stocks closed with another update of record levels – the S&P 500 gained 0.2%, while the NASDAQ increased by 0.9%. The reaction of the market may seem counterintuitive, given that the data on durable goods orders published on Monday showed an increase of only 0.5% in March, against the expected 2.5%. There are several reasons for this. First, the growth of orders excluding transport amounted to 1.6% as expected. Secondly, the revisions of the preliminary data were less negative, and thirdly, the market finally learned about the new tax changes proposed by Biden and did not consider them as a threat.
It is also worth noting that the Fed's regional manufacturing indices are coming out better than forecasts, confirming the high performance of ISM business activity. The Federal Reserve Bank of Kansas and Chicago reported a significant increase in forecasts earlier, and yesterday, Dallas showed a record level of growth, while the volume of new orders was a record for the entire 17-year history of observations, and the manufacturing sub-index updated the post-crisis maximum.
Accordingly, the Federal Reserve Bank of Atlanta predicts quarterly US GDP growth of 8.2% yesterday, which significantly adds to optimism as the publication of the 1st estimate of GDP for Q1 approaches.
The growing demand for risk suggests that the US dollar will continue to decline this week.
NZD/USD
During the previous week, Stats NZ published consumer inflation data for the 1st quarter, with an increase of 0.8% (1.5% yoy) that generally coincided with the forecast. The RBNZ immediately presented its estimate of core inflation after the publication of the data, which was at the level of 1.9%. This looks quite strong, but in any case, it is unlikely that the RBNZ will leave the policy of "patience and observation", since most of the components are temporary, that is, price growth is still unreliable from the point of view of the Central Bank.
At the same time, ANZ Bank forecasts a solid increase in inflation in Q2, attributing its confidence to an acute shortage of labor, which will inevitably lead to higher wages. The next meeting of the RBNZ will take place only on May 26. Closer to the meeting date, an increase in inflation expectations can be assumed, but caution and stability are still more likely in the very near future. As a result, the NZD has not yet formed a growth impulse.
Unlike the Australian dollar, the dynamics of New Zealand bond yields lag behind the US Treasury, that is, the spread is not yet in favor of the NZD. The CFTC report is neutral and the target price remains below the long-term average, despite a clear attempt to turn upside.
The New Zealand dollar may slightly increase higher within the corrective growth of resistance 0.7264 and 0.7309, but such a growth requires a strong driver, which is not yet observed. Therefore, a decline to the support zone 0.7160/80 and trading in a sideways range in anticipation of a much needed driver is a little more likely.
AUD/USD
The Australian economy continues to recover strongly after the partial lifting of restrictions. After the publication of positive labor market data for March, it turned out that the quarterly business confidence index from NAB rose to 17, against the forecast of 7p. The PMI in April in all sectors of the economy is also growing steadily above 58p. and has already updated the dock like 10-year highs.
The CFTC report for the AUD was neutral. The yield spread stopped declining, which lasted for four consecutive weeks. As a result, the calculated price tries to reverse up, although it is too early to draw far-reaching conclusions.
The Australian dollar is stuck around the resistance level of 0.78. The upward reversal of the estimated price indicates a growing probability of continuing the upward movement. In favor of the AUD growth, non-ferrous metals prices recorded on Monday, was led by a 2.1% rise in copper to new 10-year highs, while iron ore futures rose 0.75%.
The probability of forming a technical pattern "head-shoulders" with a subsequent return to the bearish scenario has become noticeably less. It is more likely to try to consolidate above the level of 0.78, test 0.7852, and if successful, break through the February high of 0.8009.