On Tuesday morning, stock indices of the Asia-Pacific countries are trading in the red zone and Brent crude oil goes further down from the level of $ 70/barrel. There is a tendency of risk aversion across the entire spectrum of financial markets due to the fact that China's data on industrial production and retail trade published yesterday came out noticeably worse than forecasts. The data are as follows: industrial production growth +6.4% (forecast +7.8%), retail sales +8.5% (forecast +11.5%), both indicators are also noticeably worse than a month ago.
China has been quite harsh in recent weeks, reducing incentives. Perhaps, it's a matter of long-term sales planning – the Chinese authorities are waiting for a reduction in external demand, and the point here is not only the COVID-19. but that the recovery in most Western economies, primarily in the United States, has reached a peak. In any case, we need to proceed from the fact that the demand for protective assets will grow on Tuesday morning, but commodity currencies will be under pressure, the yen and the US dollar are the favorites, and gold growth is possible.
NZD/USD
The publication of the RBNZ statement on monetary policy will be released in less than a day. The regulator is expected to raise the rate by 0.25%, that is, to 0.5% for the first time since 2014, while there is a 20% chance that the rate will be raised immediately by 0.5%. At its last meeting in July, the RBNZ agreed to reduce the current stimulus level of policy, accelerating the completion of its asset purchase program. The inflation and employment data for the second quarter strongly confirmed that the ultra-soft monetary policy has probably become redundant, and the economy faces real risks of overheating.
The RBNZ has tried to raise the rate twice since 2008 but ended unsuccessfully. In both of these cases, core inflation was low and unemployment was higher than in 2008. This time, everything is different – core inflation is rising, inflation expectations are rising, and the labor market has probably already exceeded the level of maximum sustainable employment.
The RBNZ is the leader among the G10 countries in terms of expectations, and it looks somewhat illogical that the NZD is declining on Tuesday morning. Most likely, the China factor is acting, the slowdown in the growth of which can make adjustments to expectations for the actions of the RBNZ, as well as the unconvincing minutes of the RBA meeting published immediately before the downward reversal of all commodity currencies.
According to the CFTC report, the weekly change in the NZD was small, but it is important to note that expectations for an increase in the rate did not lead to purchases. The net-short position even rose slightly from -22 million to - 72 million and the target price is still above the long-term average, but the dynamics are completely absent.
The current bearish momentum looks scary, but it is assumed that it will still not be long-term. Purchases are likely to resume in the 0.6880/6910 zone, after which we can expect growth to the upper border of the 0.7110/30 channel. In case of a breakdown of the support level of 0.6876, purchases will need to be postponed until the end of the bearish impulse. In the long term, the NZD is aimed at strong growth.
AUD/USD
The publication of the minutes of the RBA meeting from the August 3 meeting, at which the Committee members confirmed the July decision to reduce bond purchases from $ 5 billion to $ 4 billion a week starting from September, showed that there is no unity. Cabinet members expressed concern about the growth of the delta strain, which leads to a slowdown in the recovery, and the short-term prospects have become uncertain. It is possible that the uncertainty of forecasts combined with weak data on China led to the sale of commodity currencies on Tuesday morning.
The net short position on AUD increased by 571 million to -3.625 billion. The estimated price is lower than the long-term average and is directed downwards. The trend is unchanged and the Australian dollar remains under pressure.
There is growing pressure on the Australian dollar. Trading is literally one step away from the local low of 0.7288. A downward breakdown with the nearest target 0.7220/40, then 0.6990/7060 is expected. There is no reason to believe that an upward reversal is possible in the near future.
