NZDUSD Testing Daily and Weekly Range Low Near 6700 Ahead of RBNZ

Falling in the awkward post-US, pre-Asian session, the Reserve Bank of New Zealand will deliver its quarterly monetary policy statement in just a few hours (21:00 GMT). While the release is functionally equivalent to the Fed’s “live” quarterly meetings when it delivers updated assessments on the economy, the primary difference is that the RBNZ is nowhere near making any meaningful changes to policy; instead, traders will try to “read between the lines” for more insight on how the central bank is leaning for the future.

Lately, the New Zealand economy has seen some signs of slowing down, including recent disappointing readings in retail sales, car sales, housing market activity, commodity prices, and business confidence. Set against that concerning backdrop though, the economy is doing relatively well on a central bank’s two primary measures. Headline and core inflation are both rising toward the RBNZ’s target, while the unemployment rate is holding steady in the mid-4.0% range, a historically low level. With the small, export-oriented country particularly vulnerable to trade tensions, we expect that the RBNZ will err on the side of caution and make few changes to its forecasts, which recently have implied that interest rates will remain at the current level until late 2019.

Technical View: NZD/USD

Heading into the meeting, NZD/USD is in a particularly interesting spot. As the inset weekly chart below shows, the currency pair fell throughout Q2 to test the bottom of the 0.6700-0.7500 that has contained rates for the last 2.5 years. Near the bottom of the longer-term range, rates have formed a tighter consolidation zone between 0.6700 support and previous-support-turned-resistance around 0.6850.

Like a Russian Matryoshka doll, NZD/USD is coiled tight in a range-within-a-range, so any confirmed break beyond the near-term range could lead to a sustained move in the same direction. Such a breakout is inevitable eventually, and the upcoming RBNZ meeting could be the snowflake that starts the avalanche rumbling downhill (or “uphill” as the case may be!).

Source: TradingView, FOREX.com

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