The positive news about COVID-19 seems to have become a key catalyst for growth over the past day. Yesterday, the FDA fully approved the Pfizer/BioNTech vaccine, which is expected to increase immunization rates. The latest US data indicate a peak in cases, but there was a decrease in new cases by 12% n the previously leading states of Missouri and Arkansas. There was also a slowdown in other states, where the rapid spread of the delta was previously noted. Yesterday, China reported zero growth in new cases of covid since the start of the last wave, which is a strong catalyst for growth, as it reduces the likelihood of tightening restrictive measures and, as a consequence, a slowdown in economic growth.
Positive news led to an increase in the prices of Brent and WTI crude oil by more than 5%. At the same time, Copper rose by more than 2% compared to Friday, other metals showed similar growth, and commodity currencies took advantage of the opportunity and recouped some of the losses.
However, not everything is good. The main global yields remained virtually unchanged, that is, the bond market did not support the pullback of stock indices. The yields adjusted slightly, which means the shallow nature of the current pullback. The US Treasury's cash resources continue to decline rapidly, more than $ 1 trillion has already been spent since the beginning of March, and it is still unclear what will happen to liquidity if the Fed confirms its intention to start reducing QE. Accordingly, the markets are unlikely to start a strong movement in one direction or another until they hear J. Powell's speech on Friday.
There is little to expect from J. Powell. Most likely, he will talk about how to reduce QE amid the rapid reduction of the Treasury account, the achievement of the government debt ceiling, and the extremely informative trade balance that is still completely unclear.
Measures to overcome the crisis can be announced in Jackson Hole. The range of forecasts is quite large.
NZD/USD
The RBNZ's decision not to raise the rate greatly surprised the markets and did not allow the New Zealand dollar to start growing. But apparently, maintaining the current policy means only postponing the decision until October. The New Zealand economy is overheated, the growth rates of GDP, inflation, and employment exceed forecasts, so the forecasts for the rate remain confidently bullish.
According to the CFTC report, the speculative position remains neutral. The dynamics of the target price still gives grounds for maintaining a weak positive mood.
The NZD did not find a base in the 0.6880/6910 zone but managed to hold above the support level of 0.6795. It can be assumed that the bottom has been formed and the indicated currency starts the growth phase. The movement to the upper border of the 0.7110/30 channel has resumed.
AUD/USD
The extension of restrictions on movement, including the isolation of more than half of the Australian population, has done its job – both domestic and external demand continues to fall. For the first time since October 2020, there is a reduction in jobs in the service sector, and the dynamics of the PMI indices gives every reason to assume a decline in GDP in the 3rd quarter.
It is clear that an upward reversal can take place, but several conditions must be fulfilled. This is a decrease in the cases (expected due to the approach of summer), an increase in the rate of vaccination (in progress), and an increase in external demand (in question). In any case, the Australian dollar is not expected to reverse as quickly as the New Zealand one.
The net-short position on the CFTC slightly rose over the reporting week, reaching -3.65 billion dollars. The advantage is impressive. Only the yen is higher out of the G10 currencies.
It can be assumed that the AUD/USD pair will continue to decline after the upward correction. The strong resistance zone is at 0.7290/7320. It is possible to continue rising to these levels, but above it is unlikely. The long-term target is the support zone of 0.6990/7040.
