The manufacturing ISM declined by 4.7p, reporting to 60.7p contrary to expectations. This is quite surprising, since the Fed's regional reports all showed an increase in activity. It should be noted that the decline in the ISM index was not due to a decrease in demand, but rather when purchasing managers reported that their companies and suppliers continue to struggle to meet the growing pace of demand due to the impact of the coronavirus, which limits the availability of spare parts and materials.
The volume of unpaid orders reached the highest level in more than forty years, with price index is at a more than ten-year high, which is quite consistent with the growing inflationary pressure.
As both the American and European stocks continue to rally, the weak ISM data caused a barely noticeable reaction. On Monday, Fed Chairman J. Powell said that while the US economic recovery is making "clear progress," growth still remains uneven. New York Fed Chairman Williams added that current conditions are not enough to change monetary policy.
Government bonds reacted the most strongly. The ISM publication provoked a rally and the yield on the 10-year US Treasury declined from 1.652% to 1.576%, which can be considered quite a nervous reaction. Despite the fact that the yield recovered throughout the session, the pressure on the US dollar became higher at the end of the day.
Adding to the negative is the Treasury's intention to borrow $ 463 billion in April-June, which is $ 368 billion more than it forecast in February, when it expected to issue $ 95 billion in liabilities in the quarter. It did not work out. This is another worrying sign for traders, as it indicates problems with tax collection amid high social payments due to COVID-19.
In general, we assume that the dollar does not receive any support, the mood is bearish, and the chances of resuming its growth remain low before the publication of Nonfarms on Friday.
This week, there is a lot of data on New Zealand. The focus is on Q1 labor market statistics as markets draw long-term conclusions about the pace of economic recovery.
The net long position in the NZD is up 193m to 503m. The margin is still small, but there is a tendency for the target price to make an upward reversal.
If the reversal takes place, the New Zealan dollar will have a good chance to go above the high of 0.7463. However, the US dollar's weakness does not have deep fundamental reasons in the long term, so if the Nonfarm on Friday turns out to be better than expected, the chances of growth in the USD and a decline in the NZD will become noticeably higher. The nearest support is 0.7100/15, and then 0.7065/70. The target price is significantly below the spot price, which is an additional bearish factor.
The RBA kept its monetary policy unchanged at the meeting that ended this morning. And although the Australian economic recovery has been stronger than expected and is forecast to continue, inflationary pressures remain low in most sectors of the Australian economy. Bond yields also remain stable after rising at the beginning of the year, so the decision on the possible continuation of the 100 billion bond repurchase program (it will end in September) has been postponed to July.
The RBA's decision gave exactly the result that was predicted.
The AUD position is neutral in the futures market. The weekly change of +30 million to the short position is only -109 million. There is a weak positive trend.
Is it possible to expect for the continuation of growth? If the target price goes higher, it will mean a growing demand for the Australian dollar, but so far, such a thing is uncertain. A strong resistance zone 0.7820/50 has formed. From the point of view of technical analysis, the chart is similar to a head-and-shoulders pattern, but the direction of the flows suggests that an attempt to move higher will be made. The support is at 0.7660/80. If the AUD is higher, there will also be a higher probability to continue growth.