Waiting on the Fed, RBNZ to hold rates

Forex News and Events

RBNZ to stay on hold, for now

The Reserve Bank of New Zealand will communicate its interest rate decision shortly after the release of the FOMC’s statement. Just like the Fed, the RBNZ is widely expected to leave its key interest rate unchanged. The central bank already cut the OCR three times in a row over the summer in an attempt to cushion the effects of weaker global demand, which has seriously damaged the country’s export industries. However, the latest data suggests that the economic picture is somewhat improving compared to the early summer. Inflation has been stronger than anticipated by both the market and the central bank, but is still below the lower band of the target range of between 1%-3%; while growth figures are holding ground above the 2% for 2015.

However, looking at the fundamentals, we believe that another rate cut is justified, especially since its potential effects on the housing market will be mitigated by modifications to the Loan to Value Ratio restriction rule (LVRs) and to the minimum deposit threshold for investors in Auckland. Nevertheless, we think that Governor Wheeler will sit patiently on the sidelines this evening for two reasons, mainly. First, it is a busy week for central bankers. The Fed will release it rate decision a couple of hours before the RBNZ, while the BoJ is expected to announce an increase of its monetary stimulus tomorrow (Thursday, 29th Oct). Secondly, Governor Wheeler has emphasized many times that even if the central bank maintains a dovish bias, the decision to ease further will be data dependent. We therefore believe that the RBNZ wants to gather more information about the current economic situation and wait for its peers to make a move first, before bringing the official cash rate below the actual 2.75% level. However, we anticipate that the RBNZ will cut rates at its December meeting.

USDCAD - Riding Uptrend Channel

The Risk Today

Yann Quelenn

EUR/USD is consolidating after bouncing back from 1.1000. Hourly resistance is given at 1.1387 (20/10/2015 low). Stronger resistance can be found at 1.1561 (26/08/2015 low). Expected to show continued retracement of the pair. Since March 2015, the pair is improving. Key supports can be found at 1.0458 (16/03/2015 low) and 1.0000 (psychological support). The technical structure favours an eventual break higher. Strong resistance is given at 1.1871(12/01/2015).

GBP/USD is declining. Support lies at the 50% Fibonacci retracement and stronger support can be found at 1.5202 (13/10/2015 low). Hourly resistance is given at 1.5529 (18/09/2015 high). A long as prices remain in the above range, there is no clear mid-term momentum. In the longer term, the technical structure looks like a recovery as long as support given at 1.5089 stands. A full retracement of the 2013-2014 rise is expected.

USD/JPY has stopped above 120.00. Strong resistance is given at 121.75 (28/08/2015 high). Hourly support can be found at 118.07 (15/10/2015 low). Expected to show continued consolidation before targeting again resistance at 121.75. A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF has broken resistance at 0.9844 (25/09/2015 high). Hourly support is given at 0.9476 (15/10/2015 low). Expected to monitor resistance at 0.9903 (11/08/2015 high). In the long-term, the pair has broken resistance at 0.9448 suggesting the end of the downtrend. This reinstates the bullish trend. Key support can be found 0.8986 (30/01/2015 low).

Resistance and Support: