When is the RBNZ and how might it affect NZD/USD?


RBNZ overview

We have the RBNZ Monetary Policy Statement released today which is coming out a lot later than usual, with the time that has been moved to 12pm Syd/9am Sing/HK or 0100 GMT. 

Markets are looking for the RBNZ to hold the OCR at 1.75% but potentially for an even longer than the previously thought period of time with a slightly dovish shift in language guidance. The press conference that follows an hour later will be crucial as well. 

Analysts at ANZ Bank New Zealand explained that they see the RBNZ joining the lengthening list of central banks from around the world acknowledging the risks from slowing global growth:

"But it’s not just global factors: the domestic data flow has been softer on balance since the November Statement too. Indeed, market pricing puts the chance of a cut at 85% by the end of the year. And we suspect the Bank will want to endorse this view, reflecting the evolving balance of risks. However, given how far and how quickly the market has moved, the bar to meet market expectations is high," the analysts explained.

Moreover, "the RBNZ turning uber-dovish this week isn’t a necessary ingredient for our call that the next move in the OCR is down. Regardless of how the Statement reads tomorrow, we think the need for further monetary stimulus will become evident by year-end," the analysts added. 

How could the RBNZ affect NZD/USD? 

For the event, technically, the price is set up for a breakout one way or the other. However, it is not unusual that such a built-up event as this may not produce any reaction at all. Should the bank stick to giving what is expected from them today - a dovish tilt, some downside would be expected but how much of that is already priced in is the question? The pair has already dropped from above 0.6940 this month on such expectations as the US short term yields attract the flows. In fact, a surprise from the bank in either the statement or presser which highlights the strength in certain aspects of the economy would be a good play to the downside in AUD/NZD and the 1.0400 level would likely draw in the bears. However, vs the dollar, we have already seen a solid pullback to the 23.6% Fibo retracement in the DXY overnight, so bulls will look to take advantage of the fragility there. On the downside, NZD/USD can target a break of the mid-Jan swing lows at S2 around 0.6706 ahead of 0.6670 and territory towards the flash crash lows below the 0.66 handle. On the upside, 0.6800 lies between the 200-D SMA at 0.6753 and the 38.2% Fibo of the recent decline from late Jan highs. 

Key notes:

About the RBNZ interest decision and statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.

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