NZD/USD has dropped to test the bulls commitments at 0.67 the figure on the RBNZ

  • The RBNZ has held the Official Cash Rate (OCR) at 1.75% at its policy meeting today but traders looked to the August Monetary Policy Statement, (MPS).
  • All eyes were on the RBNZ's projected OCR path in the MPS which forecasts were lower - dovish and thus were hard on the Kiwi. 
  • NZD/USD has dropped to 0.6705 on the event
  • Governor Orr's press conference will now the be the main risk event.

NZD/USD made a high of 0.6763 in NY from a low of 0.6722 on Wednesday's trade while consolidating at 0.6750 going into the RBNZ decision. The Kiwi has now weakened as there is little reason to hold NZD with the US having a higher cash rate that is on the rise compared with the RBNZ's - thus the 'carry' incentive no longer applies. NZD/USD dropped to a low of 0.6704 so far. It was widely expected that the RBNZ would be on hold, so the key here is the Monetary Policy Statement.  Some were looking for a delay in the +10bp signal from Q3 2019 into 2020m  although the RBNZ have forecasted an OCR of 1.8% by Dec 2018/Sep 2019 and 2.3% by 2021 and lowered its outlook for rates ahead. There was also some jawboning when the RBNZ explained that a lower Kiwi will support the economy. Governor Orr's press conference could be interesting because his communications have been a wildcard to date.  

Monetary Policy Statement highlights:

  • The Bank has lowered its outlook for rates ahead as mentioned above.
  • RBNZ sees official cash rate at 1.8 pct in December 2018 (pvs 1.8 pct).
  • Sees official cash rate at 1.8 pct in September 2019 (pvs 1.9 pct).
  • Sees official cash rate at 1.8 pct in December 2019 (pvs 1.9 pct).
  • Sees official cash rate at 2.3 pct in September 2021.
  • Sees NZD TWI at around 72.8 pct in September 2019 (pvs 74.0 pct).
  • Sees annual CPI 1.8 pct by September 2019 (pvs 1.6 pct).


NZD/USD levels

Key resistance remains located at 0.6860 but for the near term, 0.6770, 200-hr SMA, 0.6780 100-4hr SMA come first. Should bulls manage a breakthrough recent highs and the top of the channel, 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. To the downside, 0.6720 gave out with that low of 0.6704 which now 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.

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