Antipodean currencies, notably the Australian and New Zealand dollars, experienced a significant surge against major currencies during the Asian trading session on Friday. This uptick was attributed to a growing risk-on sentiment among investors, following disappointing U.S. economic indicators. Recent data showed weaker-than-expected consumer price inflation and producer price inflation figures, alongside downbeat monthly jobs statistics, which have fueled speculation around an impending rate cut by the U.S. Federal Reserve in their upcoming meeting.
Amid these developments, the CME Group’s FedWatch Tool now reflects a notable 92.5% probability that the Federal Reserve will opt for a quarter-point rate reduction next week, with only a slim 7.5% chance of a more aggressive half-point cut. In light of the deteriorating job market, traders have also ramped up forecasts, indicating expectations for a total of 125 basis points in cuts over the next five Federal Open Market Committee (FOMC) meetings.
Meanwhile, stronger-than-expected economic data from Australia has reduced the likelihood of additional rate cuts by the Reserve Bank of Australia (RBA). As a result, the Australian dollar (AUD) has surged, currently suggesting an over 86% probability that the RBA will maintain its current policy when it meets in September.
In today’s trading, the Australian dollar reached nearly an eight-month high against the yen, climbing to 98.29, up from yesterday’s closing of 98.14. It also hit a three-month high of 1.7592 against the euro, rising from 1.7603. Should the AUD continue its upward trajectory, it is anticipated to face resistance near 99.00 against the yen and 1.73 against the euro.
Against the U.S. dollar and Canadian dollar, the Australian dollar advanced to over a ten-month high of 0.6669 and 0.9227, respectively. This reflects a rise from earlier lows of 0.6656 and 0.9214 and suggests that the AUD may test resistance levels around 0.68 against the greenback and 0.93 against the loonie. The currency also edged up to 1.1160 against the New Zealand dollar, rising from Thursday’s value of 1.1147, with the next resistance point identified at 1.13.
On the other hand, the New Zealand dollar (NZD) also demonstrated strength, reaching near-one-month highs of 88.00 against the yen and 1.9625 against the euro. These figures indicate an increase from closing quotes of 88.00 and 1.9652, respectively. If the NZD maintains its upward movement, resistance is expected around 89.00 against the yen and 1.94 against the euro. Moreover, the NZD improved to 0.5979 against the U.S. dollar, bouncing back from a recent low of 0.5967, with the next target seen around the 0.60 mark.
Looking ahead, traders are gearing up for several key releases in the New York session, including Canada’s building permits for July, capacity utilization for the second quarter, the U.S. University of Michigan Consumer Sentiment Index for September, the U.S. WASDE report, and the U.S. Baker Hughes oil rig count data.
