NZD/USD: below the 21-hr SMA, risks to the downside, 0.6720 on the table

NZD/USD has been subject to external dominating themes as the RBNZ meeting loomed around the corner, albeit with little anticipation in the markets considering the OCR is going to be left at 1.75%, according to the widest of expectations.  Instead, the RBNZ's projected OCR path in the Monetary Policy Statement will be the page-turner:

"Some look for a delay in the 10bp increase from Q3 2019 into 2020, but we don't think such a signal is necessary and look for no change in guidance," analysts at TD Securities argued, adding that "Orr, so far, is a communication wildcard, making the press conference mandatory viewing for NZD investors."

What has been affecting the Kiwi

• US: Total nonfarm payroll employment rose by 157,000 in July vs. 190,000 expected

Meanwhile, Friday's close in the US session was a wild ride. The nonfarm payrolls were the cliffhanger of an event that markets had been building up to with the central banks out of the way and other slightly more subordinate US data. However, the event was a disappointment in so much that the report failed to meet expectations and subsequently weighed on the greenback which led to a 0.6766 high and a European session recovery from 0.6721 in the Kiwi. However, nonfarm payrolls were quickly brushed aside on other fundamental headlines.

• China makes it more expensive to short CNY - ANZ

Analysts at ANZ explained it was Non-farm payrolls, the retaliatory Chinese tariffs and the reintroduction of reserve requirements for FX forwards by the PBoC that led to a busy end to the week in currency markets. "It was the latter that helped the NZD bounce off support, although it is not clear that it is going to lift too far, especially ahead of the RBNZ this week."

NZD/USD levels

With a risk-off start tot he week, 0.6720 is still on the cards despite the recent correction, (minor), and a break there opens the 18th July lows of 0.6713 guarding 1st July lows of 0.6689 and 0.6616 further down. This is all a congested area on the 0.66 handle, but 0.6550 guards a run to the 0.6470s. On the flipside, however, resistance remains located at 0.6860, but a break there could open a subsequent attack to 0.6920 as the June high. The 200-month moving average resistance is at 0.7020.