NZD/USD is poised for an eight straight day of gains
The kiwi is once again holding higher on the day after the RBNZ left its OCR unchanged at 1.50% earlier. The central bank did reiterate their dovish message and August looks to be the perfect platform for them to deliver on that. The OIS market has a ~80% probability priced in for the RBNZ to cut rates by 25 bps during that meeting.
That said, the kiwi’s good run of form since last week is seeing NZD/USD pare almost all of its decline from two weeks ago. Price now approaches key resistance levels and the big question now is can buyers keep up the momentum?
Much like everything else, a lot will hinge on how trade talks progress later this week when we get to the Trump-Xi meeting. However, with the Fed also erring more on the dovish side, there’s no doubt that the RBNZ will have to stay one step ahead to prevent price/inflationary pressures from falling off amid a stronger exchange rate.
Fundamentally, I don’t see much reason for the kiwi to rally strongly back towards the 0.69-0.70 region against the dollar and as we approach key technical levels above, sellers will be poised to lean on that to drive price back to the downside.
There’s daily resistance around 0.6667-82 so this will be a key area to watch out for in the coming days before the 100-day MA (red line) @ 0.6698 and 200-day MA (blue line) @ 0.6711 will come into play.
Unless the Fed is heavily thinking about a 50 bps rate cut – which Bullard ruled out yesterday – or if trade talks capitulate (which brings back a chance of more rate cuts by the Fed), then perhaps NZD/USD can find further upside momentum in the near-term.
However, if the Fed is to be more dovish than they are now, there’s little doubt that the RBNZ will also have to undertake a similar tone or risk further disappointment on both the economic and inflation fronts.