NZD/USD meets resistance at July 2018 lows, eyes 0.67 handle

NZD/USD is currently trading at 0.6687, between a range of 0.6596 and 0.6692, stalling at daily highs while the dollar gives back ground in New York. The Kiwi was bid throughout markets overnight following the Reserve Bank's decision to keep the OCR on hold at 1.50%. However, the RBNZ seems to have ramped up the likelihood that the OCR will be reduced further.

Key notes from RBNZ (Analysts at Westpac Banking Corporation summary):

• While the media release noted only that “a lower OCR may be needed”, the record of the Monetary Policy Committee’s meetings showed that “The members agreed that more support from monetary policy was likely to be necessary.”
• The detail of the press release and the record of meetings show growing concern about global conditions. The RBNZ’s view is that “The weaker global economy is affecting New Zealand through a range of trade, financial, and confidence channels.”
• The RBNZ was more circumspect about developments in the domestic economy. The softer housing market and the increase in government spending in the Budget were seen as offsetting factors.
• Given the tone of this statement from the RBNZ, we remain of the view that the RBNZ will most likely cut the OCR in August. The repeated comment that a lower OCR may be needed is blunter than the language used in March, which was followed by a cut in May.

All in all, given the downside risks around the employment and inflation outlook, a lower OCR may be needed which is a weight on the bird. Meanwhile, the global economic outlook has weakened, and downside risks related to trade activity have intensified which indeed will likely be addressed at this weekend's G20, making for a potentially risk-off theme for sessions to come. 

NZD/USD levels

The daily Chaikin Oscillator was crossing above the zero-line ahead of the RBNZ while the bulls took on the 50-day exponential moving average (EMA) in the sixth day of consecutive gains. The July 2018 double bottom lows around 0.6680 have been pierced and above there, the 0.67 handle is up for grabs which meet the 200-D EMA at 0.6708. To the downside, the 21-day EMA is located at 0.6584 now, guarding 0.6510 and 0.6480.