Top Story

NZD/USD under pressure ahead of RBNZ

The Reserve Bank of New Zealand will be releasing its rate decision and monetary policy statement on Thursday in Wellington, followed by a highly-anticipated press conference. This meeting will be the first for Acting Governor Grant Spencer, who is temporarily in the role while the newly-formed NZ government led by new Prime Minister Jacinda Ardern decides on a permanent appointee. Markets currently expect that the central bank will keep its official cash rate steady at the record low 1.75%, to which it was lowered exactly a year ago on Thursday.

This RBNZ meeting will be of particular importance because it will be the first such meeting after the new coalition government was formed last month. Soon after the election, the New Zealand dollar plunged when the New Zealand First party opted to form a coalition government with the Labour Party, led by relative newcomer Jacinda Ardern, rather than with the incumbent Nationalist Party led by then-PM Bill English. Concerns surrounding this new government with respect to the New Zealand dollar centered on fears that such a coalition could hinder growth. There were also related concerns that a sustained period of lower interest rates would ensue, which could sustain pressure on the kiwi.

If the RBNZ does indeed represent a dovish stance on Thursday, it will reinforce notions that New Zealand’s interest rates will likely stay lower for longer. When this is viewed in contrast against the current Fed-supported rally in the US dollar, NZD/USD could have significantly further to fall on monetary policy divergence alone. Since late July’s multi-year high at 0.7557, NZD/USD has fallen sharply in a steep downtrend, breaking down below multiple key support levels. The noted formation of the new coalition government in October prompted a swift breakdown below previous support around 0.7050 that has followed through substantially to the downside. Most recently, NZD/USD has had a short-term rise that appears to have formed a bearish inverted flag pattern, which could presage a subsequent continuation of the entrenched downtrend. With any further downside momentum as a result of Thursday’s RBNZ release, the next major downside target is around the key 0.6700 support area.

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.

The markets are moving. Stop missing out.

Open an Account