SYDNEY: The Australian and New Zealand dollars were looking to close out the month with sizable gains on Friday as breaks of major chart barriers drew momentum buyers against a US currency saddled with aggressive rate cut expectations.
The Aussie stood at $0.6797 after touching a fresh eight-month top of $0.6823, leaving it 3.9% firmer for the month.
Major resistance lies at $0.6871, a peak from last December, and then twin tops around $0.6894.
The kiwi dollar held at $0.6268, having reached a high of $0.6298 overnight, putting it a hefty 5.1% higher for the month.
Support comes in around $0.6195, with the next bull target at the peak from December at $0.6369.
This made four straight weeks of gains for the Aussie, and five for the kiwi as markets became more convinced the US Federal Reserve would start an extended easing campaign from September.
“USD depreciation cycles tend to be driven by Fed easing cycles,” noted Ray Attrill, head of FX strategy at NAB.
“That an easing cycle commences, and is protracted, is more important than the precise pace or magnitude of rate cuts.”
“Our $0.69 forecast for end-2024, rising to above $0.70 in H1 2025 remains in place, though we should anticipate ongoing high levels of volatility,” he said of the Aussie.
In Australia, investors have scaled back the chance of a near-term rate cut after consumer price figures out this week showed inflation had not slowed as much as hoped in July.
Markets now imply a 40% probability of a rate cut in November, compared to 56% before the inflation data.
Australia dollar hits 8-month highs, aided by inflation data
The chance of a December easing had also edged back to 86%, having been fully priced at the start of the week.
out on Friday was mildly dovish as retail sales went flat in July when analysts had expected a rise of 0.3%.
The subdued outcome suggested consumers were not rushing to spend cash from wide-scale tax cuts delivered at the start of the month.
The Reserve Bank of Australia (RBA) had been concerned the tax relief could pump up spending and add to inflationary pressures.
Over in New Zealand, a survey of consumers showed a pickup from deep lows in August, while business confidence surged to the highest levels in a decade.
A quarter-point rate cut is still fully priced for October, but markets have somewhat trimmed the chance of a half-point move.
There is 71 basis points of easing implied by November and no less than 208 basis points by the end of 2025.
American Dollar Exchange Rate