NZD USD

NZD/USD looks terrible on the charts, weighed down by the RBNZ’s dovish pivot and renewed concerns towards the outlook for the Chinese economy. While that cyclical play looks ill, a bounce in Nikkei 225 futures has provide a decent long setup into US tech earnings.

The Reserve Bank of New Zealand is not far off cutting interest rates, as long as domestic inflationary pressures allow. That means next week’s June quarter consumer price inflation report could sow the seeds for the RBNZ to begin lowering interest rates as soon as August. NZD/USD has fallen heavily in response.

The bullish NZD/USD breakout flagged last week has come to fruition with the trade target of .6150 reached. With the price holding around the level, we look at potential trades ahead of key events including Jerome Powell’s appearance before the US Senate on Tuesday, the RBNZ interest rate decision on Wednesday and key US inflation data on Thursday.

Having broken downtrend resistance after logging another failure below the 200-day moving average, NZD/USD may see some upside in the near-term as trading volumes thin out ahead of US Independence Day holiday.

EUR/USD and NZD/USD have returned to territory where they’ve attracted buying in the past. Given this week is likely to confirm ebbing inflationary pressures in the United States, adding to the case for Fed rate cuts, and with French election uncertainty now arguably priced in, there’s fuel around to spark some form of squeeze in the days ahead.

New Zealand is no longer in recession with economic activity expanding 0.2% in the first quarter, leaving it 0.3% higher than a year earlier. Markets has been looking for slightly softer numbers at 0.1% and 0.2% respectively. NZD/USD is pushing higher.

Markets are alert to the risk of the RBNZ switching focus, dragging NZD/USD lower. But when it comes to directional risks for the New Zealand dollar beyond the short-term, it really comes back to the US interest rate outlook and health of the global economy.

Rampant risk appetite fueled by lower US bond yields and a softer US dollar has NZD/USD on track to test of stubborn resistance zone it’s struggled to overcome in the past. Given the exuberant mood markets are in, if the Kiwi can’t break higher now, when will it ever?

New Zealand’s unemployment rate jumps more than expected despite a collapse in labour force participation, putting the Reserve Bank of New Zealand closer to cutting interest rates before the US Federal Reserve. NZD/USD fell sharply while AUD/NZD rose to new cycle highs.

New Zealand inflationary pressures continued to ease in the March quarter, although domestic prices remained uncomfortably sticky, likely keeping the prospect of rate cuts from the Reserve Bank of New Zealand a distant prospect.

Inflation remains key sticking point preventing interest rate cuts from the Reserve Bank of New Zealand, ensuring Wednesday’s first quarter consumer price inflation report will be closely watched by financial markets, especially should it print on the softer side of expectations.

The Kiwi dollar is pushing higher, potentially reflecting no escalation in dovish rhetoric from the RBNZ despite New Zealand sitting in a double-dip recession. It has an inflation mandate and inflation remains too high to justify lowering rates yet.

1-day implied volatility levels for USD/JPY, EUR/USD and NZD/USD have blown out ahead of today’s key events, which includes comments from BOJ’s governor, and RBNZ cash rate decision and the US inflation report.

While it may be one of the smallest G10 FX central banks, what the Reserve Bank of New Zealand (RBNZ) lacks in size it more than makes up for in terms of market punch, often sparking major moves in the New Zealand dollar under the leadership of Governor Adrian ‘Shock and’ Orr. Wednesday's interest rate decision may be no exception.

Traders remained net-long US dollar index futures last week, although asset managers have the more convincing bullish view for the dollar.

Some FX pairs like to gravitate towards big figures but not the NZD/USD. It’s clearly a fan of doing things in half big figure increment, proving plenty of opportunities to build trades around.

NZD/USD and AUD/USD were the strongest pairs on Monday during quiet trade, but the USD shows the potential to bounce before a larger move lower, which could eventually allow AUD/USD to reach for 66c.