The Euro currency rose above the level of 1.20 for the first time since March, responding to Pfizer's announcement that it is ready to increase the supply of vaccines to the EU by 100 million doses to the planned 600 million, which is enough to fully vaccinate 2/3 of the adult population. The rising optimism led not only to an increase in the euro, but also to a decrease in the yield spread between 10-year US Treasury and similar bonds, which the markets regard as a positive step that increases the demand for risk.
So far, the decline in US stock indices seems to be a profit-taking, not a reversal, since companies generally report high levels of earnings that exceed forecasts.
The US dollar will remain under pressure today.
The New Zealand dollar has noticeably risen recently as part of the correction, but a bullish reversal is too early to assume. Last week's results of the RBNZ meeting, which was emphatically neutral, set the positive mood. However, the markets saw in this neutrality of the RBNZ a desire to move towards the completion of monetary policy easing measures and reacted with an increase in demand for the New Zealand dollar.
Commenting on the parameters of monetary policy, RBNZ repeated all the main rhetoric from the February statement. The bank adheres to a policy of waiting, as the New Zealand economy is developing in line with expectations. And since the prospects remain uncertain, nothing is expected to change at the current stage.
As for the economy, it is impossible to ignore the strong growth in production in March from 53.4 p to 63.6 p, which is the highest figure in 19 years.
Such a rapid recovery suggests that by the meeting in June, the RBNZ will change the policy in the direction of tightening. If these expectations are implemented, NZD's initiative paired with the USD can return.
As for financial flows, there are no noticeable changes. The net long position fell by 44 million, reporting to 178 million. Moreover, the dynamics of the debt market is still in favor of the dollar, despite the downward pullback of yields. At the same time, the settlement price is still inclined downwards, despite some slowdown.
The corrective impulse is almost done. The New Zealand dollar settles on a strong resistance zone of 0.7265/7305, where a bearish wave is more likely to form with a target of 0.6750/90. If this currency goes above this resistance zone, then this scenario will not be implemented. In this case, the priority will be to update the high of 0.7462, but this scenario currently looks unlikely.
Contrary to expectations, the Australian labor market report for March was significantly better than expected – twice as many new jobs were created as predicted, and the unemployment rate declined to 5.6%, which is already very near the pre-crisis level.
On another note, the publication of the RBA minutes did not provide any new information. A significant part of the discussion was focused on the unusual behavior of households that reduced spending amid a rapid recovery in income. Here, the board members decided that this behavior is caused by high uncertainty about future income, and so, the reduction in uncertainty will contribute to the growth of spending and as a result, the growth of the economy as a whole. Until this happens, then there is no reason to change anything.
The Australian dollar's net long position changed insignificantly over the reporting week. A decline by 24 million to 287 million was reported and there is a negative trend, although not too strong. The increase in demand for risk in recent days has led to the fact that the decline in the estimated price has slowed down.
The Australian dollar has reached the resistance zone of 0.7820/50, where the formation of a local top within the "head and shoulders" pattern will most likely begin. In turn, the US dollar still has an advantage over most of the G10 currencies, despite its recent weakening. The priority is still the bearish scenario with the target of 0.7417.