NZD/USD longs are in the market, 0.63 eyed with RBNZ main event

NZD/USD is getting set for the Reserve Bank of New Zealand tomorrow and has been tucked up in a tight range due to a slow start this week with the United States out on holiday for Presidents’ Day. 

''The Kiwi’s immediate future will depend on what the RBNZ do, but as markets contemplate the cost of rebuilding and the impact that’s likely to have on inflation, insurance flows and infrastructure spending, it’s quickly becoming a potential driver of sustained NZD strength – more than we thought just a few days ago,'' analysts at ANZ Bank wrote in a note on Tuesday, adding, ''market expectations seem to have swung slightly away from arguments to go easy post-cyclone and back toward the economic arguments to press ahead with hikes.''

The US Dollar dynamic

Meanwhile, the US Dollar is being guided by US Treasuries that are pressured in a more hawkish environment. However, further significant US Dollar strength might need the Fed Funds futures market to start pricing in a 50bp rate hike in March. But with markets expecting the Fed funds rate to peak just under 5.3% by July, the move in the greenback may have run its course.

As measured by the DXY index, it fell in light trade on Monday, losing territory to a low of 103.76. However, it is still up almost 1.8% for the month, on track for its first monthly gain since September. It hit a six-week high of 104.67 on Friday and while below there, the pressures are on. 

NZD/USD technical analysis

NZD/USD has been perking up from the failed breakout on Friday and longs are in the market with the 0.6270s eyed that safeguard a move to test 0.63 territories.