Expandable dollar pull back; ECB, BoJ and lots of data this week

Risk sentiment is positive as another week begins, with major Asian indices trading higher as Japan is on vacation. The dollar extends its short-term pullback while the yen and Swiss franc are also weak. On the other hand, the New Zealand Dollar is slightly supported by stronger than expected consumer inflation data, while the Aussie and British Pound are also firmer. The Euro is mixed for now and is looking forward to the ECB rate hike later in the week.

Technically, the break of the minor support at 0.9754 in USD/CHF is the first sign of a more lasting pullback for the Dollar. Attention will now shift to the minor resistance at 1.0121 in EUR/USD. A firm break there will argue that the pair is safe for EUR/USD for now, and a stronger rebound would be seen towards 1.0348 support turned resistance. This would be accompanied by a wider squared stance of the greenback.

In Asia, at the time of writing, the Hong Kong HSI index is up 2.57%. China Shanghai SSE is up 1.34%. The Singapore Strait is up 0.62%. Japan is on vacation.

New Zealand BusinessNZ services edged up to 55.4, a sustained improvement

New Zealand’s BusinessNZ services performance index rose from 55.3 to 55.4 in June, remaining above the long-term average of 53.6 or the survey. Activity/sales went from 59.4 to 56.5. But employment improved significantly, from 49.0 to 53.1. New orders/business fell from 62.0 to 61.7. Stocks/inventories fell from 54.7 to 54.1. Supplier deliveries went from 45.6 to 47.8.

BNZ Chief Economist Craig Ebert said “the change to the amber light in mid-April, together with the accelerated opening of the border, clearly provides a basis for sustained improvement in the services sector in New -Zealand”.

New Zealand’s CPI hit its highest level in 32 years at 7.3% year-on-year in the second quarter

New Zealand’s CPI rose 1.7% y/y, 7.3% y/y in the second quarter, above expectations of 1.5% y/y, 7.1% y/y annual. Annual inflation accelerated from 6.9% year-on-year to 7.3%, a 32-year high, after 7.6% in the second quarter of 1990.

StatsNZ said: “The main driver of annual inflation of 7.3% in the June quarter of 2022 was the housing and household utilities group, due to higher construction prices and housing rents … Transportation was also a key driver of the quarterly increase, led by gasoline and diesel. »

ECB to finally start rate hikes, plenty of data presented

The ECB will finally start raising interest rates this week. As the central bank has pre-committed, there will be a rate hike of 25 basis points, for the three key rates. The question is whether the ECB will pre-commit on the size of the September hike or keep it open. The BoJ will also meet, but it is certain that the central bank will remain a bank. Other activities of the central bank include RBA minutes.

On the data front, inflation will once again be in the spotlight with the CPI from New Zealand, the UK, Canada and Japan. The UK will also release data on employment, retail sales and consumer confidence. Meanwhile, PMI data from Australia, Japan, the UK and the Eurozone will be in focus towards the end of the week. Some highlights of the week:

  • Monday: New Zealand CPI; Italy’s trade balance; Housing starts in Canada, NAHB housing index.
  • Tuesday: RBA Minutes; Swiss trade balance; employment in the UK; Euro zone CPI final; Housing starts and building permits in the United States.
  • Wednesday: Germany PPI; UK CPI, PPI; Euro area current account; Canada CPI, IPPI and IPMB; Sales of existing homes in the United States.
  • Thursday: New Zealand trade balance; Japan’s Trade Balance, BoJ Rate Decision; UK public sector net borrowing; ECB rate decision; Canadian New Housing Price Index; US Philly Fed survey, jobless claims, leading index.
  • Friday: Australia PMI; Japan CPI, Manufacturing PMI; UK Gfk consumer confidence, retail sales, PMI; Eurozone PMI; retail sales in Canada; US PMIs.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9731; (P) 0.9789; (R1) 0.9818; After…

USD/CHF’s break of 0.9754 minor support indicates that the rebound from 0.9493 is complete at 0.9884. Consolidation from 1.0063 continues with another leg down. The intraday bias is back down for the 55-day EMA (now at 0.9680). The firm break will again target the support at 0.9493. On the upside above 0.9884 rebound will resume to retest 1.0063 high.

Overall, the medium term uptrend from 0.8756 (2021 low) is still ongoing. The next target is 1.0342 (2016 high). A sustained break will resume the long term uptrend from 0.7065 (2011 low). This will remain the preferred case as long as the resistance at 0.9471 becomes support.

Economic Indicators Update

GMT Ccy Events Real Provide Previous amended
22:30 NZD Business NZ PSI June 55.4 55.2 55.3
22:45 NZD CPI Q/Q Q2 1.70% 1.50% 1.80%
22:45 NZD CPI A/A T2 7.30% 7.10% 6.90%
08:00 USD Italy’s Trade Balance (EUR) May -2.32B -3.67B
12:15 BODY Housing starts A/A June 285K 287K
14:00 USD NAHB Housing Market Index Jul. 68 67