Record of RBA meeting showed that the commission believes the cash rate is currently lower than in many economies, while the data showed higher than expected the breadth and duration of inflation. They supported continued rate hikes in the coming months (25 bps or 50 bps can be consideredwith medium-term inflation expectations holding up well.) As for maximum interest rates, the committee noted that this would depend on outflows from household income and spending, employment and price movements.
On the other hand, the Asia-Pacific trading session saw a mixed performance from Japanese PMI data for February. in manufacturingthe data was squeezed below the declining line for the fourth month in a row and was released biggest drop since August 2020 at 47.4 vs. 48.9. The report showed that weak global demand led to a further decline in purchasing activity and that foreign sales fell at a faster pace, resulting in the largest decline in both output and new orders since July 2020. services sector, the figure was recorded at 53.6, the highest since June last year. It was mainly due to a faster growth rate of new orders and a slight increase in new business from abroad. Overall, manufacturing and services PMI performance offset each other, with Japan’s final composite PMI unchanged at 50.7 in February.
Japanese inflation remains high. In December 2022, inflation in Japan rose to 4% year-on-year, the highest level since January 1991. AND weaker yen and higher prices of imported raw materials contributed to the rise in prices. Not only that, but core inflation also rose 4% year-on-year, the largest increase since December 1981. BOJ Governor Haruhiko Kuroda he later said that wages would rise in line with rising labor demand and inflation, but “they believe inflation will slow in mid-2023“.
Haruhiko Kuroda will attend his last monetary policy meeting in office next month. He will be followed Kazuo Ueta, Academician and a former member of the Bank of Japan Policy Committee. This figure is an “unknown quantity” for many, but according to Professor Shibu Takahashi, who worked with him, Kazuo Ueta cannot be classified as a hawk or a dove. “He is a “pragmatic problem solver“. Kuroda’s decision on yield curve control (YCC) in the last session will be key. If he chooses not to act, then Kazuo Ueta could face “massive bond sell-off“pressure after taking office.
Meanwhile, another key event for the Asia region is RBNZ policy announcement tonight. The RBNZ last announced an interest rate decision about three months ago, when it raised rates by 75bp to take rates to 4.25%. 400bp was added to the tightening cycle, with November’s 75bp increase the most extreme increase of the cycle. Now deciding between adding another one 75bp to raise rates to 5% or hold on 50bp to bring rates to 4.75%.
Not only has inflation it fell short of the RBNZ’s own expectations, but the measures corporate trust they also fell to historic lows and their trade PSI barely widened, suggesting the economy was set to slow. The inflation forecast for the next two years fell from 3.6% to 3.3%, but the forecast for next year is still historically high at 5.1%.
Overall, the most likely scenario is an increase of 50 basis points, but a 75bp increase is also possible. The focus is therefore on how the RBNZ’s hawkish statements are or are not perceived and whether they signal that the tightening cycle is coming to an end.
Technical Analysis: NZDUSD & AUDJPY
NZDUSD
NZDUSDD1 – This currency pair has broken below the 200-day EMA slope to be tested 0.6190 Support, support. A break of this price level would indicate that 0.5510 the rebound ended in 0.6537 (50% FR of 0.7463 – 0.5510 drawdown) and instead drop from 0.7463 the top will revert back to lower price levels. Until 0.6190 support remains intact, an upward move could test 0.6389 and 0.6537 temporary high.
Overall, the price bias is still neutral despite the RSI marking at 39 and the MACD still in the sell zone. So the next trending parameter will be the RBNZ event.
AUDJPY
The daily chart shows AUDJPY rebounding from a 9-month low on December 20 last year, then rising and in an uptrend channel area. The pair is currently testing key FR50.0% resistance at 92.70. A successful breakout would see a continuation of the bullish pattern for AUDJPY with further resistance at 94 (FR 61.8%) a 96 (FR 78.6%) which crosses the upper line of the uptrend channel. If under pressure, it could pull back and test the 100-day SMA 91.40 (FR 38.2%; bottom line of ascending channel) a 89.70 (FR 23.6%).
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Larince Zhang and Ada Phangestu
Market Analyst – HF Educational Offices
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