AUD: AUDUSD Finds Support From Ukraine News & Tests 0.6300

• NZD was trading near 0.5700 ahead of NFP on Friday, before selling off slightly following softer-than-expected NFP. The NZD/USD closed -0.26% at 0.5660, and we now trade just above the 20-day EMA. NZGBS yields have risen this morning however largely in line with US tsys so far, higher yields could support the NZD with the NZ-US 2yr last +2bps at -75bps.
• The NZD rose 0.50% over the past week, and now trades 1.18% higher Ytd behind the NOK, AUD & top performing currency JPY
• Nonfarm payrolls were softer than expected in January alone at 143k (cons 175k) but the latest two-month revision of +100k more than offset this (almost evenly split across Dec and Nov). As such, the 143k followed two even stronger than previously thought months with 307k in Dec and 261k in Nov.
• Key levels to keep an eye on to the downside is 0.5656 (20-day EMA) a break here would open a move back to Feb 3 lows of 0.5516. To the upside a break of the 50-day EMA at 0.5706 would be needed to test the ytd highs of 0.5723 (Jan 24).
• No large nearby strikes Mon. Upcoming notable strikes: 0.5935 (NZD411.1m Feb. 11), 0.5760 (NZD411.1m Feb. 12), 0.5725 (NZD399.9m Feb. 12)
• RBNZ dated OIS pricing is holding steady across the next few meeting, The market is pricing in a 87% chance of a 50bps cut for Feb, another 25bps cut priced for April, and cumulative 116bps of cuts by Nov 2025, down from 135bps early Wednesday.
• The local calendar is empty today, with the only data of note this week coming on Wednesday when BusinessNZ Manufacturing PMI is due.

Goldman Sachs: "We see three key takeaways from a frenzied week. First, the recent back and forth headlines have not altered our view that tariffs are coming and this will materially impact exchange rates. In fact, our economists now expect a larger increase in the effective tariff rate than they had previously envisioned, though not quite as high as what was threatened a week ago. As a simple summary metric, judging by the effective tariff rate, our economists previously expected new tariff measures to be worth twice as much as the entirety of the first trade war; our new baseline is for Trade War Two to be three times the size. Importantly, we see a distinction between the tariffs being bandied about now, which seem intended mainly as leverage in negotiations to extract concessions and were never a part of our baseline, and the tariffs that seem intended to address economic issues like increasing domestic production of particular products and narrowing the trade deficit. We expect tariffs of the latter type are still on the way. 

Second, it is clear that FX is responding strongly to tariff risks in both directions. This had been somewhat in question a few weeks ago, when investors were asking whether tariffs were “priced in” to FX already, and whether the Dollar could outperform rate differentials on tariff risks to the same extent as in 2018-19. We now have multiple event studies in the space of the last two weeks that provide a helpful mapping for exchange rates in response to tariff expectations ratcheting up or down. The Dollar broadly outperforms on higher tariff expectations, the Euro underperforms, and the Yen was the safe haven of choice by a slight margin. 

All of that is similar to last time, even as the response in rates and equities has been somewhat more nuanced than last time. However, while there are important caveats around these particular tariffs—the ongoing negotiations, fentanyl focus, and the fact that the higher tariff rate will take a few weeks to take full effect after taking post-holiday shipping times into account—we see a somewhat higher risk of a smaller CNY response to the tariffs we expect. But we think overall moves demonstrate that the Dollar can outperform if tariffs are actually implemented, and that FX should be the preferred asset class for hedging this risk for cross-asset investors.

Third, the solid payrolls report demonstrates that economic performance is still putting a floor under the Dollar. While we remain closely focused on risks to our forecasts stemming from tariff under-delivery and more balanced global economic performance, at least for now the US continues to set a high bar, and much of the Dollar’s strength in recent months can be attributed to shifting macro outcomes rather than tariff expectations." 

AUDUSD trended higher following the initial reaction to a mixed US payrolls report that showed fewer new jobs but a lower unemployment rate and a pickup in wages. The pair approached 0.6300 and then fell on news that US President Trump plans to announce “reciprocal” tariffs this week, especially on autos, to “address the deficit”. AUDUSD fell to 0.6253 and then recovered moderately to 0.6274 to be down 0.15% on the day. It is currently around 0.6267. The USD index is 0.3% higher. 

• AUDUSD remains in a bearish trend with initial support at 0.6171, February 4 low. Initial resistance is at 0.6304, 50-day EMA.
• The yen was one of the G10 outperformers leaving the AUDJPY down 0.2% to 94.97 to be off the intraday low of 94.49. It is currently at 94.77.
• AUDNZD is 0.1% higher at 1.1082 after a high of 1.1092. The pair is now at 1.1076.
• The euro underperformed resulting in AUDEUR rising 0.4% to 0.6073 and ticking up to 0.6078 today. Europe is expected to be targeted by Trump’s “reciprocal” tariffs given its large surplus with the US. AUDGBP is up 0.1% to 0.5057 and is currently around 0.5054.
• Equities sold off with the S&P down 1% and Euro stoxx -0.6%. Oil prices were moderately higher with Brent up 0.5% to $74.69/bbl. Copper is up 3% and iron ore stronger at around $107/t.
• There are no data or events in Australia today.