Forex Daily Summary for 20 April

The Forex daily summary for 20 April features the following key notes:

• New Zealand CPI q/q -0.3% vs. -0.2%
• UK Rightmove HPI m/m 1.6% vs. 1%
• Japan Tertiary industry activity m/m 0.3% vs. -0.6%
• German PPI m/m 0.1% vs. 0.2%

Later:

• BoC Governor Poloz speech
• RBA Governor Stevens speech

The currency markets started the new week fed by China’s further easing on the Reserve Requirements Ratio (RRR) announced over the weekend. The PBoC cut its RRR by 100bps or 1% to 18.5% in an effort to encourage banks to boost lending. The news comes hot on the heels of China easing restrictions on its closely held Shanghai exchange as well.

The Aussie and Kiwi dollars got a boost on the news with both the currencies opening the week stronger only to trim their gains into the US trading session. The Aussie dollar is particularly susceptible to tomorrow’s RBA meeting minutes. RBA Governor, Glenn Stevens is also due to speak later today and as has been the theme with the AUD, investors are looking to every possible reason to short the Aussie. AUDUSD reversed from 0.781 levels, something which we have noted in our previous analysis.

The Kiwi on the other hand managed to hold its ground above 0.76725 support. Quarterly inflation numbers from New Zealand saw a weaker than expected decline in inflation at -0.3%, which could possibly see a dovish outlook from the RBNZ Governor in the coming weeks.

The Japanese Yen was initially stronger against the Greenback but the driving force was more to do with the US Dollar’s weakness. However, USDJPY managed to briefly dip to 118.7 levels before sharply turning higher trading near 119 levels.

The European session was relatively quiet with the Euro attempting to make some initial gains but was short lived as German PPI fell below estimates. EURUSD failed to hold its previous gains and was seen falling from the highs of 1.08 levels. Next support comes in at 1.0693 levels.

With no major events scheduled from the UK, the GBPUSD was mostly susceptible to technical levels with the Cable failing to hold on to its gains near 1.504 levels. At the time of writing, GBPUSD was trading near 1.495 and looks poised to test the immediate support at 1.49. A break below this level will see a sharper decline to 1.485 levels.

The US Dollar Index which weakened most of last week is looking to stage a turnaround with the Index reversing from 97.5 support level. A continued bullish momentum from here could see the Dollar index retest the previous resistance at 98.58. A break of this resistance is essential to see further rally or it could be a confirmation of weakness in the US Dollar.

There are no economic events scheduled from the US and trading is likely to be relatively quiet. Bank of Canada Governor is due to give a speech followed by a few hours later by the RBA Governor, both of which could bring some volatility into the CAD and AUD currency pairs.