The USD is riding roughshod over this market, rising against everything now that the threat of trade wars has yielded to a shrug of the risk appetite shoulders and a resumption of business as usual: rising US equities, pricing in more Fed tightening and as the entire yield curve lifts again. The latest victim of the USD buying, aside from the constant pressure on EM currencies (see our latest EM FX Weekly published late yesterday) has been the New Zealand dollar, despite the country reporting Q1 GDP in line with expectations. Shortly after the report, the kiwi fell to a new local low versus the US dollar, joining its commodity dollar cohorts AUD and CAD in doing so and NZDUSD is now eyeing the lows since 2016 just below 0.6800.
We have no fewer than four central bank meetings today, starting first with the Swiss National Bank meeting where little signalling on policy should be expected, given still low inflation in Switzerland and the European Central Bank’s icing of its forward guidance at the meeting last week. The Norges Bank could see modest upgrades to the forward path, but oil prices haven’t been very supportive. A sufficiently positive vibe could see EURNOK dribble lower and perhaps support further upside in NOKSEK. The Bank of England shouldn’t be ready to pivot away from rather tepid expectations here, given its egg-on-the-face climbdown from hawkishness to a more neutral stance earlier this year.
The next big step for EURUSD is a break of the symbolic 1.1500 level, although strictly speaking the 1.1450 area was a more consistent pivot level in years past. Regardless, it’s hard to believe that USD momentum will end so quickly just below 1.1500, so we’ll have to sharpen our projections for where the selling may end as EURUSD looks an increasing value proposition below here. The 200-week moving average comes in just above 1.1400 while the 61.8% Fibo retracement of the entire rally sequence from the 2017 low below 1.0400 to the high above 1.2500 comes in at 1.1187.