06.07.202109:00 Forex Analysis & Reviews: RBA's decision, rising oil, and weak US dollar. Overview of USD, AUD, NZD

OPEC+ did not manage to overcome differences over August production growth. The failure in negotiations will worsen a shortage of raw materials for a rapidly recovering global economy, which has already led to an increase in September Brent futures above $ 77 per barrel. Moreover, Biden has already expressed his displeasure since the growing gasoline prices always leads to a deterioration in consumer confidence at the height of the summer season.

The pound remains one of the most active currencies after Prime Minister Johnson confirmed the UK's readiness to officially start living with the virus, rather than fighting it at every step. Perhaps, this is a new strategy to treat the coronavirus as seasonal flu, since it has fulfilled its task of rebooting the world economy and can be abolished.

Today, the US dollar will remain under pressure. The short-term indicators are not in its favor, while commodities and commodity currencies are in favor.

NZD/USD

NZIER's latest quarterly business opinion survey shows a sharp improvement in business confidence. A net 10 percent of enterprises expect an improvement in the economic outlook, taking into account seasonal fluctuations, and 26% of companies reported an increase in demand in the 2nd quarter. These results suggest that the New Zealand economic recovery will remain active in the coming year. On the other hand, the construction sector is growing at an extremely high rate, which is experiencing the highest difficulties in finding qualified labor in the entire history of research.

It is worth noting that labor shortages and supply chain disruptions lead to a further increase in capacity utilization, and an increase in production costs and selling prices indicate growing inflationary pressures. The expectation of an increase in RBNZ interest rates is getting stronger.

The estimated price is below the long-term average and is still directed downwards. The situation looks unusual – although the economy is rising confidently and the first rate hike is expected much earlier than the Fed plans to do, which will lead to a change in the yield spread in favor of the New Zealand dollar, the estimated price does not confirm this forecast.

Perhaps, the situation is that long-term investors were preparing for the strengthening of the US dollar. This is confirmed by the fact that based on the CFTC reports, the aggregate position of the NZD in the futures market is deteriorating for four consecutive weeks.

In this case, there is quite strong uncertainty for the New Zealand dollar. Excellent indicators of economic growth do not lead to the movement of capital, yields do not grow (the yield of 10-year sovereign bonds reached 1.825% in March and then fell back below 1.7% and cannot resume growth in any way), that is, the growth of NZD/USD pair is not fundamentally confirmed, at least at the moment.

The current growth should be considered as a correction. The resistance is the zone near the trend line 0.7210/40 trend line. Sales may resume if we approach this line, but an exit downwards through the support of 0.6915 is more likely.

AUD/USD

As expected, the RBA decided to keep the rate at the previous level of 0.1% during its meeting. In addition, it was announced that the regulator will continue buying government bonds at the rate of 4 billion per week at least until mid-November after the current QE program is completed in September. This half-hearted decision will avoid stressing the Australian economy due to the cessation of funding, but it is also not "dovish", as it extends QE by only 2 months.

The rate forecast also remained unchanged. It was confirmed that the rate will not increase until the actual inflation is stable within the target range of 2-3% and according to the RBA, this will happen no earlier than 2024. The RBA's decision is more like a dovish one and is unlikely to provoke an increase in the Australian dollar.

The target price remains below the long-term average. The yield on the bonds slightly increased after the RBA meeting, but not enough to revise the general trend.

The AUD/USD pair is forming a downward channel. The growth may be limited by the middle of the channel near 0.7580/7600, or if the weak US dollar allows the correction to develop higher, then the next resistance is 0.7740/60. Once the resistance is reached, one can look for an opportunity to sell with the nearest target of 0.7415 and further 0.7320/40.