NZD/USD on verge of a break below 0.67 handle; RBNZ tipped dovish

  • NZD/USD's uptrend towards the 0.70 handle has come into jeopardy as the dollar maintains a bid.
  • All eyes turn to the RBNZ, although the OCR is expected to remain unchanged and no-one expects changes for some time.
  • NZD/USD is currently trading at 0.6728 from a high of 0.6743 and a low of 0.6719. 

The greenback has been supported by UST 10yr yields, that are up 3bps, or 1.05% on the day so far, as well as a sense that the Fed will remain a step or two ahead of fellow central banks which gives the greenback the edge.

For the day ahead, the RBNZ will give markets the next central bank meeting which could well embolden the bullish case for the greenback, especially if  RBNZ Gov Orr out-doves the RBA.

"We now look for the first hike in Nov 2020, not unrelated to recent TD view changes for the Fed, BoC, and the RBA. A softer global backdrop, trade-related risks, and low-for-longer wage inflation are leaving central banks on the sidelines for longer," analysts at TD Securities explained, adding, "NZD sunk on last week's 'soft' employment report, and we expect underperformance to continue with an OCR projection downgrade throughout the forecast horizon."

US data on the cards

As for US data this week, US CPI is on tap although analysts at TD Securities explained that FX markets will need a big deviation from consensus to get a strong reaction. 

"With international events and global risk sentiment in focus, an on-consensus print is unlikely to offer much support for the buck. A strong surprise from consensus, either way, could see front-end forwards reprice strongly, while a consensus print could further encourage risk assets in the near term."

NZD/USD levels

Technically, the price broke below the 100-D SMA that had been guarding the 21-Jan swing low target just above 0.67 the figure. The price is on the verge of a breakout but the RBNZ is going to be the likely event if the move is going to happen. The indicators have been neutralised with this consolidation phase but an extension below the level will open prospects for the flash crash lows at 0.6581. To the upside, however, the 23.6% fibo retracement at 0.6770 with a confluence of the round 0.6780 and the 4hr 200 SMA at 0.6782 is the initial target area ahead of the 6th Feb highs at 0.6832.

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