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  • NZD/USD has been in the hands of the bears to familiar support.
  • The RBNZ is a critical theme for the bird, with easing on the cards.

NZD/USD ranged between 0.6671 and 0.6696 at the start of the week as it bases down at a prior support structure, bumping up several pips on the latest Trade Balance data. 

At the time of writing, NZD/USD is trading at 0.6675.

Imports, especially of fuel and cars, fell sharply in the wake of the COVID-19 pandemic, while exports held up, leading to a $1.7 billion annual goods trade surplus in the year ended September 2020, Stats NZ said today.  

Imports fell $5.9 billion in the September 2020 year. A similar large fall in trade occurred during the global financial crisis more than a decade ago when both imports and exports dropped. This year, exports have held up well despite the COVID-19 pandemic.  

RBNZ in focus

”Going forward, the Kiwi’s Achilles heels will be negative interest rates (with fierce debate ongoing as to when that will be – we still expect it in April) and risk appetite. But until either of those two things happen, the path of least resistance seems to be higher,” analysts at ANZ bank said.

Meanwhile, analysts at Westpac are of the mind that the RBNZ needs to ”pull out all the stops to stimulate the economy in order to prevent a further fall in inflation to levels below its target range.”

”We continue to expect the RBNZ to announce a Funding for Lending Programme (FLP) for banks, aimed at driving interest rates even lower, at next month’s Monetary Policy Statement. And we continue to expect that the OCR will be cut to –0.5% next April.”

”In short”, the analysts said, ”loss of the tourism sector means that the RBNZ needs to engineer a massive lift in other sectors, if we are to avoid a serious shortfall of demand that causes deflation.

The measures the RBNZ has taken to date – including cutting the OCR to 0.25%, the introduction of the large scale asset purchase program, and removal of loan-to-value-restrictions – have provided the economy with a powerful shot in the arm.”