Currency market: EUR/USD, NZD/USD and RBNZ
|The RBNZ had 2 choices to interest rate decisions. Either New Zealand market interest rates required a drop or headline at 0.25 was forced to rise. RBNZ interest rates for many weeks traded in higher elevations without drops. The entire structure of rates traded in the vicinity of 150 basis points easily over the past 2 - 3 weeks and many miles above Fed rates.
At approximately 150 basis points matches the tracking of the Fed's 10 year yield at current 1.51. New Zealand's 10 year yield at 2.00 trades 50 basis points above USD's 10 year and AUD's 10 year trades alongside the Fed at current 1.57.
At 150 basis points broken down then means RBNZ rates trade right about 40 basis points above Fed rates and quite high from past years.
The RBNZ's OCR rate traded far below headline for many weeks. The raise to 0.50 brought RBNZ's average rates to a normal level from a massive miles high scale. Another raise would further drop the averages.
The RBNZ's concern was averages and this required a drop because the 150 ish basis point range hasn't changed which explains NZD/USD 50 pip move upon the raise announcement. NZD/USD lacked movement to its range.
The RBNZ's move as usual was smart yet forced but also a forward view decision as the RBNZ is well prepared to raise again if and / or when the Fed raises but also prepared for a drop if economic times grow worse. A drop won' t hurt the RBNZ nor NZD.
NZD/USD and EUR/USD trade massive oversold while AUD/USD and GBP/USD trade fairly neutral. The top and bottom, NZD and EUR oversold V middle currencies AUD and GBP neutral is perfectly correct to alignments.
NZD/USD targets easily 0.6984 and 0.6956 for today's day trade. EUR/USD targets upper 1.1600's, low 1.1700's. For today's day trade, EUR/USD targets 1.1613 and 1.1605 on a break of 1.1584.
USD/CAD trades oversold and miles overbought USD/JPY while USD/CHF turned fairly neutral. USD/JPY will become the odd ball currency next week to oversold /neutral to USD/CAD and USD/CHF.
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