FX Daily Strategy: Asia, April 8th
RBNZ To Hold at 2.25%
Japan Labor Cash Earning Needs to Pick Up Further
DXY Remain Geopolitical Driven
The RBNZ decision will be announced on Early Wednesday. While we forecast no change to current interest rate, there is a slim chance the RBNZ will revise their inflation forecast higher and tilt hawkish. The RBNZ has been downplaying the already overshot inflation to keep financial condition accommodative but the latest oil shock could see CPI shooting further higher and change their mind. We doubt the RBNZ will be as hawkish as the RBA to turn towards tightening but it could be in the forward guidance where we see a hawkish tilt.
On the chart, the pair edged up from Friday's fresh year low at .5680 low as prices unwind oversold intraday and daily studies. However, bearish structure keep pressure on the downside and a later break of .5680 low cannot be ruled out. Lower will see room for extension to support at the .5650/40, congestion and trendline from the April 2025 year low. Break here, if seen, will return focus to the .5600/.5578 congestion and November low. Meanwhile, resistance remains at the .5750/.5777 congestion and 1st April high. Clearance here will ease the downside pressure and see room for stronger gains to resistance at the .5800/.5850 area.
With a hike widely expected to come soon, Labor ash earning will be critical data point for the BoJ and market participants. The strong wage negotiation should see wage to continue increase above 2%. yet, we will likely need more traction to persuade the BoJ an imminent hike as they may have second thoughts from geopolitical tension. Anything above 3% will be hugely supportive.
On the chart, the pair is drifting narrowly below the 160.00 level but pressure remains on the upside following bounce from 158.27 low last week. Bullish structure from the 152.10 January current year low suggest scope for retest of the 160.00 figure and 160.46 high. Would expect reaction at these highs but a later clearance cannot be ruled out. Clearance will open up scope to 161.00 level then 161.95, 2024 year high. Meanwhile, support is at the 159.45/159.00 area which extend to the 158.27 low. Would take break of these ease the upside pressure and see room for deeper pullback to the 157.50 support.
The Trump fiasco deteremines the next leg of DXY. Geopolitical crisis has driven market participants to rush into USD for haven bids. We are expecting a polarized result from Trump's deadline coming and should see decisive move for the greenback soon.
On the chart, as prices consolidate the break above 100.00. Intraday studies are rising, suggesting room for a retest of congestion highs around 100.30. But mixed/negative daily readings should limit any initial tests in fresh consolidation, before improving longer-term charts prompt a break and open up a test of strong resistance at the 100.64 current year high of 31 March. Meanwhile, any immediate tests below congestion support at 100.00 should meet renewed buying interest towards further congestion around 99.50.