NZD/USD bulls attack 0.6950 on RBNZ, NZIER comments, NZ PM Ardern in focus

• NZD/USD extends two-day rebound from late August lows.
• RBNZ annual report praises performance, NZIER cites ‘shadow board’ divide on rate hike push.
• Market sentiment dwindles amid mixed clues but softer USD helps Antipodeans.
• Sino-American headlines, NZ PM Ardern’s speech will be important amid off in China.

NZD/USD picks up bids to 0.6950 during early Monday morning in Asia. In doing so, the Kiwi pair keeps the latest recovery moves despite mixed comments from the NZ Institute of Economic Research (NZIER) as well as the Reserve Bank of New Zealand (RBNZ).

As per the latest NZIER report, the shadow board policymakers are divided on the RBNZ rate hike as the ongoing lockdown in Auckland battles inflation fears. On the other hand, the RBNZ Annual report praises the Te Pūtea Matua performance and shows readiness to combat the house price crisis moving forward.

It’s worth noting that the NZD/USD buyers remain cautious as New Zealand Price Minister Jacinda Ardern will be decided on Auckland’s virus-led emergency alert level as the COVID-19 numbers escalate, recently by 33, while spreading outside the capital Auckland.

“And while a move out of level 3 for Auckland this week now seems highly doubtful - following the spread of Delta to Raglan and Hamilton - Ardern indicated this morning there could be the easing of some restrictions for the region, as experts study the granular detail of how cases are spreading,” said NZ Herald.

Looking backward, hopes of stimulus and the US dollar pullback helped the NZD/USD prices during Thursday and Friday. Also helping the pair buyers could be the upbeat performance of equities and softer US Treasury yields. Though, the US inflation and consumer sentiment numbers back Fed tapering fears and probed the buyers. Also on the negative side were the headlines concerning China’s economic challenges due to the Evergrande and power-cut problems.

Recently, the US criticized China’s activity near Taiwan and is up for conveying the dislike for Beijing’s lack of performance on the phase one trade deal. On the contrary, the optimistic comments by US President Joe Biden and House Speaker Nancy Pelosi suggesting the much-awaited infrastructure spending bill will be out soon.

Amid these plays, S&P 500 Futures print mild gains, tracking Friday’s US equities, but the holiday in China and regional off in Australia, question the NZD/USD traders.

Today’s cabinet decision on alert level change for Auckland will be the key for the NZD/USD traders as this will impact the RBNZ’s much-awaited rate hike, expected on Wednesday. Amid these plays, the Australia and New Zealand Banking Group (ANZ) said, “We expect the RBNZ to go ahead with hiking the OCR on Wednesday, while noting downside risks to the outlook. They made it clear it would take a “sustained” large fall in business sentiment to suggest a net negative demand shock that would derail hikes, and we haven’t even seen a meaningful temporary one. A follow-up hike in November is no sure thing though, because the picture is deteriorating.”

Technical analysis

Although 0.6860-55 restricts the immediate downside of NZD/USD prices, a convergence of 200-day EMA and a descending trend line from September 16, near 0.7015, becomes the key hurdle for the pair buyers.