FX Update: NZD knocked lower by RBNZ. JPY surge fizzles FX Update: NZD knocked lower by RBNZ. JPY surge fizzles FX Update: NZD knocked lower by RBNZ. JPY surge fizzles

FX Update: NZD knocked lower by RBNZ. JPY surge fizzles

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The RBNZ made it clear it will move against any further NZD strength in its latest statement, which knocked the NZD sharply lower overnight. Elsewhere, the USD rises and falls continue to slavishly inversely track developments in risk appetite while an unusual JPY surge yesterday has so far failed to hold.

The US dollar wilted broadly yesterday on the fresh surge in risk appetite and has come back this morning, no surprise, on the wobble in the stocks into the US close and then some new defensiveness in risky assets later in the European morning. USDJPY saw a sudden jolt lower yesterday that looked odd relative to the lack of volatility in other assets at the time. The move took out support levels below 106.58 and triggered stops before rebounding smartly – an odd move considering muted trading in safe haven fixed income and strong risk appetite across equities yesterday. The bounce has taken the pair well away from the more important 106.00 area and a move and close back above 107.00 suggests yesterday’s move was a misleading development (possibly on SoftBank’s sale of T-Mobile USA shares, which netted the company $15 billion and could have a one-off FX impact).

The RBNZ maintained its dovish reputation overnight by adding foreign asset purchases to its list of “deployable tools” – a move that suggests any backup in the NZD will meet heavy resistance. I suspect the RBNZ has its eye on the kiwi’s very sharp assent back toward the highs of the range (in broad effective terms) of the period since late 2017. The RBNZ has a history of intervening, so while this may not necessary engineer a new immediate and sustained slide, it does throw up a major obstacle to further strength. 

Today’s calendar looks quiet, while concerns about the fresh spread of Covid19, particularly in the US, could (or is it should?) eventually weigh on sentiment.

The RBNZ overnight triggering renewed interest in NZD selling – here a rise in AUDNZD – so far a rather weak echo of the move in the NZD lower on the back of the May 13 RBNZ meeting that opened up the discussion of negative-rate potential. Interesting to see if the NZD continues to track lower in the wake of last night’s meeting. The December STIR futures contract for New Zealand only registered a three-tick rise (pricing in rates of 3 bps lower – not exactly an avalanche.) By touting foreign asset purchases as a policy tool, the RBNZ has placed the bar for a stronger NZD from here much higher, even if this meeting fails to set the NZD on an immediate path lower. For AUDNZD, the focus now on whether this local move holds and then on the resistance line ahead of 1.0900.

Source: Saxo Group

The G-10 rundown

USD – trying to post a comeback after two days of steep losses and it is tough to distinguish between an inverse chart of the broad USD versus the S&P 500 Index (sent a chart of this on my Twitter: @johnjhardy)

EUR – EURUSD backtracking a bit here after the two-day surge that didn’t seem to have any obvious drivers. The consolidating only looks threatening for a test of the recent lows if 1.1250 is giving way (though as noted above for the USD, general risk sentiment is in the driver’s seat).

JPY – the USDJPY move lower is holding just well enough to keep things interesting, but easy to reverse with a move back above 106.80, arguably – and expect USD and JPY to move in sympathy against other currencies.

GBP – sterling faltering today in its latest attempt to get a solid foothold above 1.2500, but not in danger again until below 1.2400, with UK news heating up next week around Brexit negotiations starting Monday.

AUD – the AUDUSD has been in limbo for weeks now and needs to either vault back below 0.7000 or crumble below 0.6800 to make an impression. The Aussie strength rests on the reflationary macro theme expressed in commodities markets as we discussed in today’s Saxo Market Call.

CAD – USDCAD politely inspected the 200-day moving average below 1.3500 yesterday before bobbing back higher into the recent tight range – offering a hook for bulls to get involved, with a break above the 1.3686 pivot needed to argue that the pair is breaking higher. A close above 1.3575 or so would be first above 21-day SMA since mid-May.

NZD – kiwi smacked lower by the RBNZ and with that, NZDUSD and NZDJPY shorts perhaps offer the most tailwind for trying a contrarian attempt to trade for a risk-off move here.

SEK – risk off as the European session hits mid-morning sees EURSEK rebounding back higher – a choppy chart lacking conviction – and will likely follow risk appetite inversely.

NOK – the NOK may prove more sensitive to risk appetite swings if oil is in for a bit of consolidation as well, and the well etched 11.00 are on the EURNOK chart could have significant stops lined up above – squeeze alert if we actually see a two- to three-day correction in the equity market or worse.

Upcoming Economic Calendar Highlights (all times GMT)

  • 1100 – Czech Central Bank Announcement
  • 1430 – US Weekly DoE Crude Oil and Product Inventories
  • 1630 – US Fed’s Evans (Non-voter) to Speak
  • 1900 – US Fed’s Bullard (Non-voter) to Speak
  • South Africa Supplementary Budget (no time given)


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.