Summary:

  • RBNZ leaves rates unchanged, no major impact on NZD
  • NZDUSD could aim at 0.70
  • US dollar gains again in Asia on remarks from Rosengren
  • Equity markets mixed in Asia, JAP225 gains, CHNComp leads declines

The RBNZ decision was a major event of the Asian session – the last central bank meeting this month. Unlike the Fed that was a turning point for the US dollar the RBNZ offered little to support the kiwi that has been already struggling under a burden of inconclusive elections (that occurred last Saturday). The key points of the RBNZ statement are as follows:

  • Monetary policy will remain accommodative for a considerable period
  • Numerous uncertainties remain and policy may need to adjust accordingly
  • Longer-term inflation expectations remain well-anchored at around 2 percent
  • Future headline inflation to reach the midpoint of the target band over medium term
  • House price growth has moderated further, this moderation is expected to continue
  • There remains a risk of resurgence in house prices
  • Lower NZD would help the economy
  • NZ TWI has eased slightly since August

Well not many cornerstone statements here. A take on the currency is a bit easier than the last time but do notice that the Bank keeps the pressure on the NZD despite recent declines. To be sure, there is nothing that could reverse fortunes for the currency in the near future. 

link do file download link

NZDUSD keeps moving down after a reversal signal on a weekly time-frame. Source: xStation5  

Looking at the NZDUSD rate we can see a continuation of declines following a major reversal last week. On the weekly time-frame this situation is reminiscent of those from August 2016 when a pin-bar from the same resistance zone started a long correction. Bears could target 0.70 as their first goal.

While the NZD has been mixed in its response the US dollar was on top of the G10 list once again. Traders should notice a speech from Eric Rosengren (Boston’s Fed) who said that regular rate increases were appropriate and the US economy was at risk of overheating from rising inflation and asset prices. He then added fuel to the fire by hinting that hurricanes could cloud the data over the next few months. This means that the Fed may increase rates in December regardless of the data treating any deterioration as temporary. 

Equity markets were mixed in Asia – Japan gained as the yen weakened (JAP225 is up nearly 0.5%) but the Chinese Hang Seng (CHNComp) was down 0.8%.