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When releasing the Annual Report for 2019-2020, the Reserve Bank of New Zealand’s Governor, Adrian Orr says “we take our commitment as kaitiaki (guardian) of New Zealand’s financial system seriously.

”Our latest Annual Report details how we have delivered against our priorities and allows you to hold us to account.”

“Although the COVID-19 pandemic disrupted some of our progress, we still achieved a lot,” Orr explained. 

In the statements, the RBNZ said it is committed to supporting economic recovery through unanticipated and unprecedented challenges.

Market implications

The RBNZ is expected to introduce a Funding for Lending Programme in November where a resulting fall in interest rates will boost asset prices and suppress the kiwi, boosting inflation as the intended effect. 

”We continue to expect that the cash rate will be reduced to -0.50% in April 2021 and that the RBNZ will purchase $100bn of assets as part of its Large Scale Asset Purchase Programme,” analysts at Westpac forecast. 

NZD/USD technical analysis

In examining the kiwi, we have to take note of the price action in the US dollar which has, so far, stayed in a consistent course within a 5-wave technical pattern as follows:

If this plays out, then we can expect a dollar bloc weakness which should suppress the New Zealand dollar for the foreseeable future, much to the RBNZ’s taste. 

However, when looking to the NZD/USD chart, there is still an upside bias as the technical environment remains bullish, at least according to the indicators. 

This is confirming the following analysis from yesterday: NZD/USD Price Analysis: Bulls set on at least a 38.2% Fibonacci retracement

However, resistance is compelling and may deter additional demand, at least until a break of the resistance to confirm the bullish trend remains intact.

The confluence of a 38.2% Fibonacci retracement meeting with resistance could otherwise be enough to ignite a fresh wave of supply, fitting nicely with a 5th-wave to the upside in the DXY.