NZD/USD: Aussie and CNH leading the bird lower, RBNZ to clip its wings

The NZD has been buoyed by strong Q2 GDP recently, but  RBNZ Governor Orr is likely to stamp out much of that optimism in the RBNZ later this week that follows the FOMC showdown. The outcome for the bird could be a killing the bird with two stones, or, it could be a more balanced outcome for the Kiwi should the FOMC turn out to be dovish. 

In the meantime, there is risk of a break to the downside should the Aussie break out below the recent lows today as EM-FX rears its ugly head again. At the same time, trade wars are starting to concern investors again after a period of complacency.  In this respect, China's foreign minister outlined that its officials are willing to negotiate on trade but talks are impossible under threat and pressure and it doesn't seem that Trump will be taking his foot off the gas anytime soon. 

RBNZ outlook

Analysts at TD Securities explained that the unanimous consensus expects the OCR to remain at 1.75% and the Governor to muse that the OCR could move “up or down” as per the Aug MPS. Dropping “we expect to keep the OCR at this level ... into 2020” is an unlikely hawkish twist."

"While Q2 GDP was strong, negative investment and employment intentions suggest a H2 slump, and so a recovery would be hawkish for the NZD. Inflation expectations on target at 2.2%, but the RBNZ is looking elsewhere just now."

NZD/USD levels

Support is located at 0.6620 and resistance is located at 0.6720. The bird remains cosolidated below the doji at 0.6680. If the bird can't break the doji's top at 0.6699 on a pullback, the case will be building for a sustained correction/reversal. First, the pair needs to break 0.6711 as the 76.4% retracement of the daily downtrend from 0.7393. However, on a correction of the uptrend, a drop back into the downside opens a continuation risk towards 0.6500 that would open up 0.6344 and 0.6306 on the wide.