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AUD, NZD Deadlock Breaks to Downside, Risks Further Losses

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SYDNEY, June 4 Reuters The Australian and New Zealand dollars were on the defensive on Friday after weeks of deadlock broke to the downside when a scare on U.S. policy tapering slugged risk sentiment.

The Aussie was nursing a grudge at 0.7661, having shed 1.1 overnight to crack major support at 0.7675.

The break of a monthlong range triggered a round of stoploss selling and turned the technical background bearish, with 0.7617 the first chart target.

After that are a string of lows from March and April in the 0.75657585 band and ultimately the 200day moving average at 0.7534. A rally above 0.7715 would suggest the downside break was a false move and restore the old range.

The kiwi dollar was down at 0.7146 after diving 1.2 overnight, though it levelled out just above major support at 0.7116. A break would open the way to at least 0.7065, while the 200day moving average is still some distance away at 0.7019.

The lunge lower came after strong U.S. data pointed at upside risk for the payrolls report due later Friday and also to mounting inflationary pressures.

That stoked fears the Federal Reserve might consider when to start tapering its asset buying, scaring equities and lifting bond yields.

The Reserve Bank of Australia RBA is expected to start a tapering of its own at its July 6 policy meeting, with most of the market assuming it will not extend its threeyear yield target to the November 2024 bond.

The RBA Board is likely to decide that there will be no…

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