NZD/USD: There are Grounds to Increase Long Positions
Following yesterday’s meeting of ECB, which did not bring surprises, investors started to focus attention on the forthcoming meetings of the Central Banks of New Zealand (27 April), USA (27 April), and Japan (28 April).
There are all grounds to open long positions. US Fed is going to continue gradual tightening of the monetary policy. Now investors try to guess when the US Fed will increase interest rates next time. Yesterday, the USD was supported by strong labor market data. It became known that the number of initial applications for unemployment benefits in the USA last week amounted to 247 000 against the forecast of 263 000 and 253 000 for the previous period. The index showed the decrease of unemployment rate, which means that NFPR for April may be also positive. US stock market has almost completed recovered after the collapse at the beginning of the year. The index DJIA is far above the highs of 2015
Financial market expects that the Bank of Japan will adopt additional incentive measures. Strong earthquake on the island Kyushu in April has increased these expectations.
ECB has made decision to continue extra - soft monetary policy. Bank’s president Mario Draghi did not exclude possibility of the further reduction in the rates, assuring the market that the rates will remain at the current level or may be reduced in long-terms even after the completion of QE.
The pair has been declining for the third consecutive day from the highs at the level of 0.7050. Next week the Reserve Bank of New Zealand may announce reduction of the interest rate and continuation of the monetary policy easing in order to support export sector of the national economy. It is possible that the Bank will lower interest rates three times this year: in April, June and August. Expectations of the reduction in interest rates in New Zealand aimed at decreasing the price of the national currency; the US Fed’s measures aimed at tightening monetary policy will continue to put pressure on the pair NZD/USD in the medium-term. It is likely that upward correction in the pair NZD/USD, which has been lasting since the beginning of February, will reverse into the downtrend.