NZD/USD bears alert to the RBNZ risk and a firmer USD

NZD/USD is currently trading at 0.6591 in a tight range to start the Asian day, between 0.6582 and 0.6593.  

The forex space is dominated by geopolitics, equities, yields and the US dollar while the direction in all has equated to a near-term cap for the bird as markets get set for the Reserve Bank of New Zealand.

The greenback was supported on the back of tension between the US and China and a moderate lift in real yields at the end of last week.

China imposed sanctions on 11 US citizens including lawmakers from President Donald Trump Republican Party on Monday in response to Washington’s imposition of sanctions on Hong Kong and Chinese officials accused of curtailing political freedoms in the former British colony.  

However, price action was pretty muted on the back of this and instead, investors are moving to value as seen on wall street, which has weighed on the big tech companies and stemmed the ongoing recovery in the broader stock markets.

Meanwhile, there is now a focus on the RBNZ to deliver a dovish tone. 

Local data has beat expectations of late; while welcome, the longer-term outlook remains highly uncertain and we expect all options – including negative rates and foreign asset purchases to remain on the table. As we note on page 1, that speaks to headwinds for the NZD, 

  analysts at ANZ Bank explained. 

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