The US dollar was sold off actively after the comments of the head of the Fed Bank of Atlanta, Raphael Bostic, in which he actually contradicted his earlier message about the possibility of raising the rate in March by 0.5% at once. Moreover, Bostic said that he sees three increases this year, which looks too soft in view of market expectations of 4-6 increases.
Bostic's position was supported by Daly, who said that "the Fed is keeping up with the curve" and by George, who said that "more aggressive actions on the balance sheet could lead to a smoother key rate trajectory."
All this looks like an attempt to limit market expectations and is predictably putting pressure on the US dollar.
NZD/USD
The New Zealand dollar recovered another bearish momentum, breaking through the lower border of the channel. Its prospects became noticeably worse due to last week's data on consumer inflation in the 4th quarter. The growth from 4.9% to 5.9% y/y leaves no doubt about the strength of inflationary pressure, while the RBNZ shows indecision. The position of the RBNZ causes real yields to decline, making NZD-denominated assets less profitable.
Analyzing the reasons for the growth in prices, ANZ came to the conclusion that inflation will rise to 6.4% in the 1st quarter of 2022, and it will take at least a year and a half to bring it down to the 3% target. This will be possible only with decisive action by the RBNZ, but they are just not enough.
The RBNZ's next meeting will take place on February 23, where there are assumptions to raise the rate by 0.5% at once. So far, such a possibility is regarded as unlikely, especially amid the RBNZ's indecision in recent months. Last summer, it was believed that the RBNZ would be the leader in restoring normal monetary policy, which would push the NZD/USD upwards, but the regulator, worried about provoking a crisis in the clearly overheated housing market, is postponing the rate increase.
The net short position of the New Zealand dollar increased by 156 million to -720 million. The advantage is still small, but there are no positive dynamics. Traders are not buying NZD yet, as the decline in real yields makes assets in NZD unattractive.
It is still assumed that the potential growth of NZD/USD could be much stronger than most other currency pairs, but buying is still early until there is a clear signal from the RBNZ. ANZ Research suggests buying at the fall and going long, but a bullish signal is needed.
The nearest resistance is 0.6600/20. There must be a reason to return to the channel, which is not visible yet. Trading in the range is more likely in anticipation of signals from the RBNZ.
AUD/USD
As expected, the RBA ended its quantitative easing program, the last purchases will be made on February 10. At the same time, the expected announcement of a rate hike in 2022 did not happen, which can be regarded as a predominantly dovish outcome of the meeting.
The Australian regulator believes that it is still early to talk about the growth of rates while the actual inflation is in the range of 2-3%. Besides, wage growth has weak dynamics and does not exert significant pressure on inflation.
In fact, RBA has no reason to rapidly exit a soft monetary policy. Although it forecasts 4.5% GDP growth in the main scenario this year, the growth rate of consumer demand remains questionable. Retail sales unexpectedly decreased by 4.4% in December, while AiG's manufacturing PMI fell from 54.8% to 48.4% in January. So, a rate hike against this background is clearly early.
The RBA lags behind the majority of the Central banks, which have either already started raising the rate or have announced their intention to do so in the near future.
As follows from the CFTC report, the weekly change in the futures market amounted to +401 million. The net short position at the end of the reporting week was -5.955 billion, which clearly shows a bearish advantage. The settlement price has no signs of a reversal.
Technically, the AUD/USD pair continues to trade within the bearish channel, with a target at the support level of 0.6760/80. The chances of an upward reversal will increase only if the global economy shows a steady upward trend, which is unlikely in the current situation. The nearest resistance is 0.7100/10. Growth towards it is less likely.