NZD/USD remains pressured ahead of RBNZ
James Chen, CMT May 9, 2018 12:02 PM
As the US dollar took a bit of a breather on Wednesday after a prolonged, three-week rally, kiwi traders were positioning ahead of the Reserve Bank of New Zealand’s rate decision, monetary policy statement, and press conference, all scheduled for Thursday morning in Wellington (Wednesday evening in New York and London).
As the US dollar took a bit of a breather on Wednesday after a prolonged, three-week rally, kiwi traders were positioning ahead of the Reserve Bank of New Zealand’s rate decision, monetary policy statement, and press conference, all scheduled for Thursday morning in Wellington (Wednesday evening in New York and London). Markets are not expecting any changes to interest rates or monetary policy from the RBNZ at that time.
The RBNZ’s last statement in March indicated that the central bank was not expecting to raise rates anytime soon from its current record low of 1.75%, due to slowing economic growth and weak inflation. At that time, Acting Governor Grant Spencer stated that “monetary policy will remain accommodative for a considerable period.” If this dovishness continues to prevail on Thursday, the very likely prospect of Fed interest rates overtaking RBNZ rates as soon as June could serve to place additional pressure on NZD/USD over both a short- and medium-term horizon.
From a technical perspective, NZD/USD has continued to breakdown since mid-April, in large part due to a robust and persistent rally in the US dollar. During the course of this tumble, NZD/USD has broken down below key support factors including the 0.7200 area, the 200-day moving average, and most recently, the 0.7050 prior support area. Since that most recent breakdown, the currency pair has extended its fall, establishing a new year-to-date low around 0.6948 as of Wednesday. With any continued dovishness from the RBNZ on Thursday, along with sustained support for the US dollar, NZD/USD could be poised to drop towards further lows. Any such bearish resumption amid the RBNZ decision could pressure NZD/USD back down towards a major support target around the 0.6800 level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.