NZD/USD turns lower as the RBNZ hold rates once more

The RBNZ held rates at 5.5%, as per consensus view. Quite why that came as a surprise and sent NZD lower is interesting, given they already effectively confirmed 5.5% as their peak rate. But it’s possible that the initial false break above 60c ahead of the decision allowed bears to reload at more favourable prices once the RBNZ confirmed that growth was expected to slow. The latest COT data shows that large speculators trimmed shorts over the prior few weeks, so the general risk-off vibe and RBNZ-peak rate combo allows some bears to re-enter.

My summary of their statement.

Interest rates are constraining economic activity and reducing inflationary pressure as required
While GDP was stronger than anticipated, its outlook is expected to remain subdued
Spending growth is expected to decline further
Headline #CPI has eased for most of our trading partners
Apart from oil, global import prices have eased
There’s a near-term risk that activity and inflation do not slow as much as needed
The OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range

NZD/USD technical analysis (weekly chart)

The weekly chart shows that prices remains within a bear trend and are seemingly breakout of a bear flag pattern. And its mast projects an approximate target just beneath the 2022 lows. Large speculators are net short according to the latest COT report, and at and why it may have reached an extreme by recent standards we have seen net-short exposure twice as high in 2019. Furthermore, bears have trimmed net-short exposure in recent weeks, which leaves potential room for them to reload and short due to risk-off sentiment and confirmation the RBNA are not likely to hike.

NZD/USD technical analysis (daily chart)

NZD/USD saw a momentum shift with a false break above 60c heading into the RBNZ’s decision. With momentum now realigned with its downtrend, bears could consider short opportunities with breaks of support levels or countertrend bounces towards resistance. 60c is a clear level of resistance, along with the 59c handle.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor