Close to 2011 lows, New Zealand dollar expects the outcome from the Reserve Bank of New Zealand (RBNZ). Market widely expects that central bank is about to leave the Official Cash Rate (OCR) unchanged during Thursday meeting and signal rates to be kept on hold for some time. In previous statement we could see change in language from monetary policy tightening to adjustment of rate according to data.
Focus of FX market will turn to any possible dovish comment for the NZ dollar that could motivate the currency to reach even 2010 lows.
Another relevant point of statement, to keep eyes on, remains the inflation outlook. As RBNZ hinted during January meeting statement, prices could decelerate and even turn negative in upcoming months until getting back on track to 2%.
RBNZ is also expected to reiterate unjustifiably high exchange rate with low impact on forex exchange rate.
Actual trading is being led mostly by US dollar, strengthening due to next week’s Federal Open Market Committee statement expectations. Market widely believes that ‘patience’ could be dropped out of the statement due to june’s rate-hike speculations.
Supported by couple of Federal Reserve representatives, US dollar strengthened during last month, boosted even by risk-off, seen mostly on stock markets.
What to expect after RBNZ?
If RBNZ leaves OCR unchanged but hints possible rate cut, worsened inflation outlook of even actual fears of dry conditions in country, hurting agriculture, we may expect NZD to continue in current drops. If breaching $0.7100 level, we could expect $0.7046 to be a possible support level, or next psychological 0.7000.
In case of any bullish hints, possible tightening, better inflation estimates, albeit not widely expected, could cause correction of kiwi back above $0.7300 to approach resistance level at $0.7376 or $0.7436.
