AUDUSD and NZDUSD Hit Hard on Souring Risk Sentiment, China Lockdowns

Australian Dollar, New Zealand Dollar, China – Talking Points

• AUDUSD in freefall as US Dollar continues to reign supreme
• NZDUSD challenging YTD low around 0.6860 as slide continues
• China continues to stimulate, but markets focus on growth concerns

AUDUSD and NZDUSD have both come under significant pressure as regional headwinds clash with a global souring of risk sentiment. Recession concerns have weighed on both currencies as the broader commodities complex remains on the back foot. On top of regional weakness, recent Fedspeak has given the Greenback a renewed bid this week. The Fed’s Loretta Mester revealed that she would like to see rates move above 4% in early 2023, while also indicating that she currently expects rates to be held at elevated levels for some time. These headwinds have put renewed selling pressure on AUD and NZD, with the latter testing YTD lows during Thursday’s session.

Antipodean Economic Calendar

Courtesy of the DailyFX Economic Calendar

The Australian Dollar has been under pressure lately as China continues to fight against Covid. Despite recent stimulus in China, the Aussie has been at the mercy of the Greenback. Souring risk sentiment following Jerome Powell’s Jackson Hole Economic Symposium remarks has seen a major sell-off across financial markets. Australia continues to run a major trade surplus as coal, LNG and other key natural resources remain in demand. The futures market also implies another 200 basis points of rate hikes from the Reserve Bank of Australia over the next 12 months, which may also bolster AUDUSD should the Fed slow its pace of rate hikes.

AUDUSD 4 Hour Chart

Chart created with TradingView

The New Zealand Dollar has fallen heavily over the last few weeks, with NZDUSD currently testing YTD lows below 0.6860. Crumbling under the same headwinds as the Australian Dollar, the Kiwi remains heavily tied to risk sentiment. As other central banks continue to push forward with hawkish policy, the Reserve Bank of New Zealand (RBNZ) is priced for two 50 bps hikes into year-end, which may buoy the Kiwi. The current bearish tone to the NZDUSD cross may continue should no turnaround in global growth momentum materialize. If this zone around YTD lows holds, price may look to retrace to the pivot area around 0.6215. However, near-term direction may hinge on the market reaction to the US nonfarm payrolls report on Friday.

NZDUSD 4 Hour Chart

Chart created with TradingView

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— Written by Brendan Fagan

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