- The Kiwi is bouncing at the key 0.6800 level as markets engage in profit-taking.
- Further downside is largely expected as a dovish RBNZ sees little reason to lift rates any time soon.
The NZD/USD is experiencing a bounce in early Thursday trading, testing back over the 0.6800 key barrier following a Reserve Bank of New Zealand (RBNZ) outing that saw the central bank remain on hold on rates, a move that was very much expected.
The RBNZ delivered a dovish rate call that markets had widely expected, with New Zealand’s central bank expected to remain on hold on interest rates for the foreseeable future. The RBNZ’s single-page statement delivered with the rate call sees the next rate move from the central bank, whenever it may come, at even odds of being either up or down as New Zealand continues to grapple with an underperforming economic recovery.
Today’s RBNZ action delivered nothing new for traders to chew on, and today’s bounce could be a potential profit-taking correction, as noted by ANZ analysts earlier: “A stronger USD, together with yesterday’s poor Business Outlook survey, has seen the NZD break key downside support levels. One has to wonder about market positioning here, leaving the potential of a near-term profit-taking bounce. However, the medium-term picture looks to be for more weakness.”
NZD/USD levels to watch
As noted by FXStreet’s own Ross Burland, “support is located at 0.6740 while resistance is located at 0.6850. 0.6680 comes as next downside target meeting the lows 21st May 2016 weekly stick. On the upside, albeit not favoured, above 0.6850 and then the 50-D SMA at 0.6982 comes 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 a touch above 30 and oversold territory).”
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