The minutes of the FOMC meeting, published on Wednesday evening, did not provoke revival in the markets, since Fed Chairman Powell had already visited the banking committee of Congress literally the day before, where he had revealed the main parameters of the Fed's current position.
The growth of oil and the gradual lifting of quarantine measures objectively contribute to the revival of markets, but economic problems and trade contradictions have not disappeared, and current optimism has no reliable basis.
NZD/USD
The New Zealand dollar experienced the effect of three important events last week - the transition to alert level 2 and the partial lifting of quarantine measures; QE growth following the RBNZ meeting to 60 billion; government adoption of an expanded budget with strong cost increases. It is predicted that in August QE will grow to 90 billion, which will fill the budget.
Kiwi has not yet gone beyond the range, the resistance is 0.6160, and the calculated price is directed down confidently, which means only one thing - major players do not yet see any reason for growth, since the probability of a strong decline in markets remains very high.
The New Zealand dollar, like other commodity currencies, supports the current positive growth, but there is no fundamental reason for continued growth of the markets. Testing the resistance level of 0.6173 is possible, but even updating the maximum will not mean an upward turn of the NZD/USD. For now, we must proceed from the fact that growth is corrective and its completion will provide a good opportunity for sale.
AUD/USD
Investors expect that the coronavirus will start the processes in the economy in a positive scenario – business activity has fallen to the lowest levels in a very short time, having absorbed in this movement, the objective reasons for the slowdown of the global economy, and a gradual recovery will begin from the lowest point, which can no longer interfere with the purely economic reasons that were relevant 3-4 months ago.
According to a study by Commonwealth Bank, PMI in the service sector is already slightly higher in May than in April (25.5p vs. 19.5p), and despite the fact that this result clearly indicates a further decline in business activity, it is already perceived as a positive result. Comment by Garrett Aird, RBA spokesman: "We must mark the lowest point of the PMI, and now expect activity to increase monthly"
More attention is focused on China's intentions to adjust trade with Australia. Today, China announced its intention to raise duties on grain exports from Australia. A day earlier, it gave the opposite signal about the possibility of expanding exports, including wine, seafood, fruits and dairy products.
The Australian dollar is moving in clear anti-phase with an estimated price. Speculators are building up a short position on AUD's futures, which reached $ 2.292 billion and helps to weaken the Australian currency, but the current short-term positive impulse keeps it in the range.
Despite a successful attempt to break through the resistance 0.6650/60, the chances of continued growth are low. A short-term impulse may push the AUD/USD pair slightly higher to the resistance zone 0.6665 / 80, but a serious recovery in the debt market is necessary for the development of the upward movement.
There are first signs - last week, Woolworths retailer issued bonds for the first time since the pandemic amounting to $ 400 million, La Trobe Financial also issued bonds with mortgage coverage in the amount of 1.25 billion. The demand is high, which should lead to an increase in demand for AUD. Corporations start issuing bonds because the RBA implements a program to support the bond market by adding corporate-level securities to the list of acceptable collateral. Perhaps, this measure will support the Australian dollar in the coming weeks and contribute to its growth, but there is no reversal in the long run, and the probability of a sharp decline in AUD amid the deteriorating external conditions remains high.
The material has been provided by InstaForex Company - www.instaforex.com