NZD/USD: bulls committed to the key support level, Kiwi under-performing

NZD/USD has been rejected at the 100-hr SMA and week's opening previous resistance level around the 0.6750 mark. The bird has suffered a sell-off down to 0.6727 lows and moved in, stabilising, for a close of 0.6734.

The markets were range-bound overnight and lacking fresh impetus with much of the sentiment a repeat of yesterday's trade with eyes on geopolitical risk between the US, China and the Middle East as Iran comes to the fore in respect to oil prices. As a whole, the commodity complex was firmer, (but still pretty unimpressive considering the spike higher in Chinese stocks). However, the Kiwi was underperforming more so on the crosses as expectations were building up for a dovish RBNZ tomorrow. 

"The USD largely dictated moves overnight, although ranges remain relatively tight. The NZD initially pushed higher only to subsequently drift lower, again finding itself sitting near support, although like yesterday we are not sure it will have enough momentum to break through ahead of tomorrow's RBNZ decision," analysts at ANZ Bank New Zealand Limited ("ANZ") explained.

RBNZ outlook

Despite there being absolutely no expectations of a shift in the OCR, the RBNZ’s MPS on Thursday will be closely watched by markets.

That is because, as analysts at Westpac note, the RBNZ has signalled it is likely to remain on hold for a long time (March 2020, according to its OCR forecast, which is in line with market pricing):

"The key bits which markets will focus on (in a quite detailed document) will be (1) whether the guidance phrase “up or down” is retained (we think it will), and (2) whether the OCR forecast is tweaked (we think it won’t). Changes in the economy since the May MPS sum to around zero impact on the OCR forecast, so the spirit of the statement should remain as it was in May (and in August’s minor review). One thing to watch out for, though, is how the RBNZviews the Budget – we thought it was stimulatory, but in August the RBNZ said it was not. Retaining and explaining that judgement could give the MPS a dovish tone."

NZD/USD levels

0.6724 has been the low and a break here opens the 1st July lows of 0.6689 and 0.6616 further down. Further out, 0.6550 then guards a run to the 0.6470s. On the flipside, however, resistance remains located at 0.6860 and should bulls manage a break through there with daily closes, 0.6920 as the June high comes as a key level. The 200-month moving average resistance is at 0.7020.