- NZD / USD volatility is the order of the day this week around the RBNZ.
- 0.7220 and 0.6800 are daily swing levels observed based on the result.
The NZD / USD sits near 0.7000 in the open and appears resistant to the strength of the US dollar despite the risk averse mood. The pair lost around 20 pips on Friday but positioned relatively well, with traders positioning themselves for higher interest rates in New Zealand ahead of this week’s Reserve Bank of New Zealand meeting.
“Whippy price action appears to be the order of the day this week,” ANZ Bank analysts said, noting markets are divided over whether RBNZ will offer a 25 bp or 50 bp hike Wednesday. “Fireworks are virtually guaranteed no matter what they do,” they added.
The markets appear to be getting a little half-empty, and we wouldn’t be surprised if 25 basis points puts the NZD under pressure, considering that interest rate support is not as strong. Or ironically, 50 basis points could be seen as the straw that broke the camel’s back for the economy. But it might be a lot simpler than that – other countries are normalizing too, and that could eat away at New Zealand’s former lone star power. ”
Meanwhile, analysts at TD Securities concede that 50 basis points is a possibility given soaring inflation expectations and the labor market in turmoil. Analysts argue that the Bank risks missing its mission in the medium term. “If our baseline comes to fruition, the bank could signal a faster path to neutrality,” and this “is likely in future meetings once the economic recovery gathers pace as current COVID restrictions expand. will soften “.
NZD / USD technical analysis
Price is finding support following the recent daily sell-off of bullish USD fundamentals. A break of trendline support opens the risk down to 0.6800 while a break of recent highs should set the stage for October highs near 0.7220.