NZD/USD: RBNZ-led rally stops amid US-Sino trade pessimism, eyes on China data

Having registered a noticeable run-up, based on the RBNZ’s no rate cut, NZD/USD bulls catch a breath amid increasing doubts over the US-China trade deal and the Governor’s latest remarks favoring low rates. Kiwi traders now await key statistics from China/Australia while witnessing 0.6410 as a quote at the start of Thursday’s Asian session.

After witnessing a huge response to the central bank’s no rate cut, the RBNZ Governor Adrian Orr recently crossed wires while saying that the rates need to stay low for a longer period of time. Mr. Orr also mentioned that the decision to rate cut was also debated. This might have stopped buyers from extending the post-RBNZ rally off-late.

Also questioning the rise was the Wall Street Journal’s (WSJ) report that the trade talks between the United States and China hit snag over farm purchases. The same could also be senses from the Chinese President Xi Jinpings latest comments criticizing the US trade protectionism (indirectly).

The Reserve Bank of New Zealand (RBNZ) held its monetary policy unchanged, by beating odds of a 0.25% rate cut, while cutting down immediate growth forecasts. The New Zealand dollar (NZD) surged across the board as an outcome. “While the RBNZ revised down its growth forecasts significantly yesterday, it also revised down its estimate of the economy’s speed limit. It now requires less forecast growth to be able to forecast achieving their medium-term inflation target. That, plus the more helpful TWI and CPI starting points, saw them stay pat, while noting it was a close thing. The market was pretty certain about a cut, which saw a sharp lift in rates and the TWI. The lower near-term GDP forecasts (Q3 0.3% q/q) raise the bar for a February cut significantly – we’re now penciling in May and August, taking the OCR to 0.5%, with risks skewed towards earlier and/or more,” says the Australian and New Zealand Banking group (ANZ).

Markets are now gearing up for the key data from New Zealand’s major customers, including Australia and China. While the Aussie employment report and China’s Retail Sales/Industrial Production are likely to portray mixed scenario for the kiwi pair, any disappointment could have higher repercussions after the pair’s latest rise.

Technical Analysis

Unless breaking 0.6420/30 area on the daily closing basis, including 100-day Exponential Moving Average (EMA) and 38.2% Fibonacci retracement of July-October downpour, prices are less likely to aim for 0.6500 round-figure. However, an ascending channel formation since early-October can keep buyers happy until prices slip below 0.6308.