RBNZ Cut Rates To A Historic Low NZDUSD

RBNZ cut rates for the first time since November 2016, taking it to a new record low of 1.5% today. Yet whilst NZD is broadly lower, RBNZ’s hint 1.5% is it for now could limit downside over the near-term.

Summary of the statement:

(OCR) has been reduced to 1.5 percent.
Lower OCR necessary to support the employment outlook and inflation consistent with its policy remit.
Global economic growth has slowed since mid-2018
Uncertainty about the global economic outlook
Domestic growth slowed from the second half of 2018
Employment near maximum sustainable level, yet growth outlook is more subdued Inflationary pressures projected to rise slowly
OCR now consistent with objective and provides a more balanced outlook for rates

Markets were quick to respond, with NZD crosses shedding over 1% in a flash and breaking key levels. AUD/NZD spiked within pips of our 1.0732 target and NZD/CAD endeavoured to ‘break it down’. However, given that RBNZ suggest 1.5% could be the floor then we should question how much is priced in, at least over the near-term.

At time of writing NZD/USD is forming a potential bullish pinbar on the daily and four-hour charts. Today’s spike lower momentarily tested the lower bounds of its regression channel (using 2 standard deviation band) and prices are trying to recover back above the breakout level highlighted yesterday. For now though, we’d prefer to see prices stabilise before considering further shorts, although if bullish momentum breaks comfortably above its channel then it’ll be on the backburner. Whereas a break above 0.6685 invalidates the bearish trend structure.

Keep in mind that trade talks will likely dictate sentiment from here, and this places export nations such as New Zealand (and therefore their currency) in the crossfire. So if prices can stabilise and retain their bearish structure, the original bearish target near the 0.6425-65 lows still stands.

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.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.