Kiwi Catching Flight On Hawkish RBNZ Comments
NZD Soaring
The New Zealand Dollar has been on a tear against USD recently with NZD the strongest performance against the Dollar this month. The recent rate hike from the RBNZ alongside warnings of further tightening to come have helped drive a fresh wave of NZD buying. This more hawkish outlook has been juxtaposed against the dovish repricing we’ve seen in the Fed outlook recently. Questions had begun to surface on the back of the recent decline in oil prices and the softer jobs data we saw at the start of the month. This week, the big miss in June CPI helped cool Fed tightening expectations sharply with USD dropping accordingly. There is now clear divergence between the Fed and RBNZ with the former appearing more likely to hike again before the Fed tightens, if indeed it does tighten this year.
Hawkish RBNZ Comments
NZD received further support this week from hawkish comments by RBNZ chief economist Conway. Speaking overnight, Conway noted that developments in the Middle East were complicating the monetary policy outlook for the bank but pointed to upside price risks for the bank’s September forecast. As such, Conway signalled that a further reduction in monetary stimulus would likely be needed. As such, traders are widely expecting further tightening form the RBNZ while Fed tightening expectations in coming months have fallen. Should Fed rate hike pricing fall further this could create room for a higher drive in NZDUSD in coming weeks/months.
Technical Views
NZDUSD
The rally in the kiwi has seen price breaking back into the triangle pattern, now testing the big .5853-level resistance. This is a key pivot for the market and a break higher here will turn focus to the triangle highs next and the .5987 May/June highs above. To the downside, main support to watch is .5690.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.