- RBNZ’s surprise decision to stand pat prompted some aggressive short-covering move.
- The risk-off mood, US-China trade uncertainty, USD strength capped any further gains.
- The focus now shifts to the latest US consumer inflation figures and Powell’s testimony.
The NZD/USD pair held on its post-RBNZ strong gains to over one-week tops, with bulls looking to extend the momentum further beyond the 0.6400 handle.
The pair caught some aggressive bids on Tuesday and finally broke out of its three-day-old consolidative trading range after the Reserve Bank of New Zealand (RBNZ) surprised investors by standing pat. Given that a 25bps rate cut was nearly priced in, the decision to leave rates on hold triggered a bout of short-covering around the major.
Bulls take a breather after the post-RBNZ upsurge
Meanwhile, the US Dollar stood tall near multi-week tops amid positive US Treasury bond yields. This coupled with a slight deterioration in the global risk sentiment, amid persistent US-China trade uncertainty, turned out to be the only factors that weighed on perceived riskier currencies and capped any further gains for the Kiwi.
The recent optimism over the possibility of a US-China trade deal faded rather quickly after the US President Donald Trump indicated over the weekend that he would only sign if it was the “right deal” for America. Trump further added on Tuesday that the US will increase tariffs on China if the first step of a broader agreement isn’t reached.
It will now be interesting to see if bulls are able to maintain their dominant position or the pair meets with some fresh supply at higher levels as the focus now shifts to Wednesday’s release of the latest US consumer inflation figures. This will be followed by the Fed Chair Jerome Powell’s testimony and produce some meaningful trading opportunities.
Technical levels to watch
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