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So Mr Wheeler and friends at the RBNZ raised rates as expected by .25% to 3% last night. I think that some of the language that accompanied it was a lot less bullish than the last time and we are starting to hear them speak in stronger terms about their concern over the high valuation of the currency.

They just may be softening up the markets to put interest rate rises on hold but it of course will be “data dependent”.

If we think about levels here, we are already at the upper end of the trading range and we got as high as 0.8630 post rate announcement. I wasn’t surprised with the move, and will be looking for Kiwi to find a lower top today ahead of a resumption to the downside as per the recent weakness.

I believe in the broader cyclical flows which warn of a major top in the currency, and I also contend that external global macro pressures will ultimately weigh on the currency. So while NZD/USD has seen a bit of a bounce into Thursday, my recommendation would be to wait for the next pullback and sell the pair again on a break back below 0.8550.

A break below 0.8550 would completely negate the post-central bank event risk bullish price action and open the door for more significant declines.

Also keep in mind that markets are connected and the recovery in US equity markets back towards record highs has also been supportive of Kiwi gains too, however US equities are still long overdue for a significant corrective decline which should negatively influence the New Zealand Dollar. I remain bearish.

– Gary