Kiwi eyes off 0.66 handle after week of strong gains

Daily Currency Update

After a week of solid gains for the New Zealand Dollar, Friday’s session was a relatively quiet one as the US markets were closed for Independence Day. With little news to drive markets, the Kiwi continued its ascent against the greenback, closing the out the week around the 0.6530 level and taking its weekly improvement to 1.9%. Although the AUD/NZD ticked up 20 points on Friday to touch 1.0640, the strong weekly performance by the Kiwi saw a 0.62% weekly decline for the cross, presumably due to the outbreak of new COVID-19 cases in Victoria.
On the macro front, we have domestic commodity price data from ANZ; analysts are expecting the recent strength in dairy prices to translate into an improvement from the prior read of -0.1% however it is not expected to move markets. Across the pond we have Australian inflation data this morning which should continue to show little to no inflationary pressure to worry the RBA. It should also be a similarly gloomy story for the ANZ Job ads read. Although the number edged 0.5% higher in May, the outlook for the labor market is still uncertain as businesses plan for a post-covid environment. Looking offshore, we also have Eurozone investor confidence data and retail sales data for May which are expected to paint a brighter picture than April given some restrictions have been lifted. Finally, we will get US services PMI out of the world’s largest economy to round out the session.

Our levels to watch for the session ahead are a bit harder to predict given the lack of lead in from the US markets on Friday. On the upside, there is potential for NZD/USD to test 0.6585 and possibly break through the 0.6600 handle. Given the speed of last weeks ascent, downside supports are considerably lower with the weekly low of 0.6380 acting as the first line with any moves below expecting to meet firm trendline resistance at 0.6200.