NZD/USD Reverses Post-RBNZ Rally, Flirts with 0.6900

NZD/USD Reverses Post-RBNZ Rally, Flirts with 0.6900

28 April 2016, 06:04
Roberto Jacobs
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NZD/USD Reverses Post-RBNZ Rally, Flirts with 0.6900

The NZD/USD pair retreats nearly half the RBNZ-led rally and now wavers around 0.69 handle as markets come to terms with an outrightly dovish RBNZ stance at its policy meeting earlier today.

NZD/USD: Shorts squeeze loses steam

Currently, the NZD/USD pair trades 0.29% higher at 0.6903, retracing further below 10-DMA at 0.6919. The Kiwi is seen reversing the bizarre rally witnessed after the RBNZ kept rates on hold at a record low of 2.25%, as widely expected, and talked down the NZD levels, while adding that the policy is likely to remain accommodative.

The knee-jerk 120-pips spike post-RBNZ announcement was seen in response to shorts squeezed after the central bank disappointed markets, with no clear guidance for a June rate cut. Meanwhile, markets had upgraded the chances of a cut from 30% to 46% during the previous two days, as analysts at Westpac noted.

The bird was heavily offered in the overnight trades after the FOMC meeting bolstered the USD bulls, knocking-off NZD/USD to 0.6808 in an immediate reaction to the Fed announcement. Looking ahead, markets will assess today’s RBNZ policy statement ahead of the US advance GDP numbers due later in the NY session.

NZD/USD Levels to consider

To the upside, the next resistance is located at 0.6942/50 (post-RBNZ highs), above which it could extend gains to 0.6978/0.7000 (daily R1/ psychological levels). To the downside immediate support might be located at 0.6879/75 (1h 50 & 100-SMA) and from there to 0.6850/44 (round number/ daily S1).


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