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29 Jul 2015
NZD/USD: FOMC before bird can move higher again
FXStreet (Guatemala) - NZD/USD is currently trading at 0.6697 with a high of 0.6739 and low of 0.6657.
NZD/USD had rallied on the back of the bullish speech made by RBNZ's Wheeler yesterday in early Asia which took the bird up to 0.6738 on the knee jerk. The main take away from the speech left the bird bid due to the rhetoric delivered by Wheeler that the economy was being supported by several factors including the service's sector, labour force participation and the easing in monetary conditions (such as a weaker bird and lower OCR rate). Markets got the giveaway when Wheeler commented on interest rates and, "Large declines in interest rates currently predicted by “some local commentators” would only be consistent with the economy moving into recession."
Meanwhile, the pair suffered in the hands of the bears when we moved over to Tokyo last night and then on to European markets where demand was strong for the greenback running up to the FOMC coming up on the next hour. However, the event is anticipated to be tame on markets due to nothing new without a press conference, hence no change and we are still on track for a hike before the year is out. Waiting for the outcome…
Trade the Fed FOMC meeting with Bednarik and Carrillo - Live Coverage
The downside, albeit supported here at 0.6680 for the time being, would be consistent with the broader view of the RBNZ that the currency needs to go lower. Analysts at RBS explained that the RBNZ is still clearly jawboning the currency lower, and thus we might expect a relatively limited further bounce in the NZD.
"However, in light of the lift in NZ rates in the last day, the risks around the Fed policy delaying hikes in light of lower commodity prices and weaker activity in many less developed economies, it would make sense to be prepared for a further near term rise in NZD. It may need to rise through the recent high around .6770 to squeeze out short positions. We prefer a wait and see stance at the moment to assess where the Fed are likely to be in the lead up to their September rate decision. We should not discount the possibility of a retracement in the NZD to the 38.2% Fibonacci level (0.6978) of its slide from its recent high in late April."
NZD/USD had rallied on the back of the bullish speech made by RBNZ's Wheeler yesterday in early Asia which took the bird up to 0.6738 on the knee jerk. The main take away from the speech left the bird bid due to the rhetoric delivered by Wheeler that the economy was being supported by several factors including the service's sector, labour force participation and the easing in monetary conditions (such as a weaker bird and lower OCR rate). Markets got the giveaway when Wheeler commented on interest rates and, "Large declines in interest rates currently predicted by “some local commentators” would only be consistent with the economy moving into recession."
Meanwhile, the pair suffered in the hands of the bears when we moved over to Tokyo last night and then on to European markets where demand was strong for the greenback running up to the FOMC coming up on the next hour. However, the event is anticipated to be tame on markets due to nothing new without a press conference, hence no change and we are still on track for a hike before the year is out. Waiting for the outcome…
Trade the Fed FOMC meeting with Bednarik and Carrillo - Live Coverage
The downside, albeit supported here at 0.6680 for the time being, would be consistent with the broader view of the RBNZ that the currency needs to go lower. Analysts at RBS explained that the RBNZ is still clearly jawboning the currency lower, and thus we might expect a relatively limited further bounce in the NZD.
"However, in light of the lift in NZ rates in the last day, the risks around the Fed policy delaying hikes in light of lower commodity prices and weaker activity in many less developed economies, it would make sense to be prepared for a further near term rise in NZD. It may need to rise through the recent high around .6770 to squeeze out short positions. We prefer a wait and see stance at the moment to assess where the Fed are likely to be in the lead up to their September rate decision. We should not discount the possibility of a retracement in the NZD to the 38.2% Fibonacci level (0.6978) of its slide from its recent high in late April."