- Technicals lean bearish; daily RSI has dipped below 30 and into oversold territory.
- RBNZ: “Compared to the May statement, it did read a touch dovish” – TD Securities.
NZD/USD is continuing its southerly trajectory, printing a fresh two-year lows after the dovish RBNZ statement, with any upside attempts faded at the 10-hr SMA, scoring a low of 0.6749 in the US session today.
The RBNZ kept the cash rate on hold as widely expected at 1.75% yesterday, although the accompanying one-page statement portrayed a more dovish rehtoric while the Bank took the opportunity to highlight the downside risks to the domestic AND global economy.
“Compared to the May statement, it did read a touch dovish. TD’s official RBNZ call for it to hike has also been pushed out from Feb 2019 to May 2019, but retained the November 2019 hike to have the cash rate at 2.25% by yr end next year,” analysts at TD Securities explained.
Key points from the event, (Source, Westpac, “Uncertainty reigns: RBNZ OCR Review”):
- The Reserve Bank reiterated that the OCR is expected to remain low, but gave no guidance about the timing or direction of the next move.
- Overall, this Review sounded slightly more dovish than previous RBNZ communications.
- The RBNZ’s communication style is shifting towards emphasising uncertainty.
- The RBNZ is becoming less bullish about economic growth. We were surprised that theRBNZ shifted its view on that today.
- In the bigger picture, the RBNZ’s forecasts and financial market pricing are converging on our long-held views. The economy will be mixed in 2018, and the OCR will not need to rise until November 2019.
- The RBNZ assessed the Government’s May Budget as less stimulatory for the economy than previous forecasts. We disagree with that.
NZD/USD levels
Key support is located at 0.6740 while a break above 0.6850 would need to take place in order to alleviate downside pressures. On a break below the said support, the next key level is located at 0.6680 as the lows 21st May 2016 weekly stick. On the upside, albeit not favoured, above that 0.6850 level, the 50-D SMA at 0.6982 comes before 0.7060 guarding space en route to 0.7440 as the January tops on the wide. However, while well below the key 200-month moving average support at 0.6980, technicals stay bearish. RSIs are biased to the downside longer term, (daily RSI has dipped below 30 and into oversold territory).
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