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  • NZD/USD has dropped on the back of the trade data  for August -1484m.  
  • New Zealand trade balance for August -1484m and a big miss vs the expected -925m, prior -143m.
  • Exports a miss at 4.05bn vs the expected 4.40bn and prior 5.35bn.
  • Imports 5.45bn vs the expected 5.50bn and prior 5.49bn.

This data does little for the bulls in an increasingly bearish outlook fundamentally for the bird – cementing the case for the downside and a return trip to what was already  an ambiguous correction within a broader  bear trend.  NZD/USD has been in a pullback since reaching and piercing the trend line resistance up at 0.6696 and has eyes for the 0.6617 support that guards the 21-D SMA at 0.6607 following the doji printed last week at the 0.6699 highs.  

NZD/USD will now be subject to what goes down in the  business confidence data and then it back to the China/US trade spat, EM-FX and indeed the outcome of the FOMC tonight and RBNZ that follows tomorrow.  

RBNZ outlook

Westpac NZ economists are expecting that the RBNZ will leave the OCR unchanged at next week’s OCR Review:

“However, there is still a one in three chance that the RBNZ cuts the OCR over the coming year:

  • We expect the tone of the OCR Review to be either neutral or dovish from a market point of view.
  • A neutral Review would simply restate that the next move could be “up or down.” – The other possibility is that the RBNZ adopts a “soft” easing bias, explicitly warning that if the economy fails to accelerate as expected, the OCR could fall.
  • This would match RBNZ comments made in the media, and would be in the spirit of open and frank communication that the RBNZ has embraced.
  • It seems very unlikely that the RBNZ will issue a hawkish statement that causes interest rates and the exchange rate to rise. The balance of risks for next week’s OCR Review is in the direction of lower interest rates and a lower exchange rate.”

NZD/USD levels

The bird is offered below the doji  and targets the 0.6620 level.   If the bird can’t break the doji’s  top at 0.6699 on a pullback, the case will be building for a sustained correction/reversal.  First, the pair needs  to break  0.6711 as the 76.4% retracement of the daily downtrend from 0.7393. A drop back into the downside  opens a continuation risk towards  0.6500 that would open up 0.6344 and 0.6306 on the wide.