NZD/USD: pending RBNZ decision on rates

NZD/USD: pending RBNZ decision on rates

6 February 2018, 13:09

Against the backdrop of negative events taking place in the world stock markets, today's decision of the RB of Australia to keep the current interest rate at the previous level of 1.5% remained almost unnoticed. On Tuesday, at the first meeting this year, the Reserve Bank of Australia left a key interest rate at a record low for the RBA of 1.5%. At this level, the rate has been already in place since mid-2016. The inactivity of the RBA contrasts sharply with the propensity of the Fed, the ECB and the Bank of England to tighten monetary and credit policy.

This week, two of the world's largest banks make a decision regarding monetary policy. On Wednesday (20:00 GMT), the RB of New Zealand decides on the interest rate, and on Thursday (12:00 GMT) decision on this matter will be announced by the Bank of England. As expected, both central banks will not change the current monetary policy; the rate in New Zealand will remain at the same level of 1.75%. Earlier in the RBNZ repeatedly stated that against the backdrop of "a lot of uncertainties" monetary policy "will remain soft in the foreseeable future", but "can be adjusted accordingly", if necessary. For a stable recovery in New Zealand's economy and rising inflation, "a lower New Zealand dollar rate is needed".

At 21:00 (GMT) on Wednesday the RBNZ press conference will begin, during which the representative of the RBNZ leadership Grant Spencer, who is the acting manager (his term of office in the RBNZ management came into force on September 27, 2017 and will end on March 26, 2018) , will make an explanation about the decision taken by the bank. His speeches often serve as an unofficial source of information on the further direction of the RBNZ monetary policy. In his view, the country's monetary policy should correlate with the dynamics of employment and financial stability of the state, rather than inflation.

From the news for today, we are waiting for the publication of the results of the next dairy auction (in the period after 14:00 GMT). The main part of the New Zealand economy is the timber and agricultural complex, and a significant part of the New Zealand export is dairy products, primarily milk powder. Two weeks ago, the price index for dairy products, prepared by Global Dairy Trade, came out with a value of +4.9% (against previous values ​​of + 2.2% and + 0.4%). If the prices for dairy products rise again, the New Zealand dollar will strengthen, including in the pair NZD / USD. The decline in world prices for dairy products will hurt the quotations of the New Zealand dollar.

From the news on the United States today, it is worth paying attention to the speech (at 13:50 GMT) of the representative of the Fed and member of the FRS Committee on Open Markets, James Bullard, as well as the publication at 13:30 (GMT) of data on the US foreign trade balance for December. The deficit is expected to grow to -52 billion dollars from -50.5 billion dollars, fixed in November. This is a negative signal for the US dollar.

Thus, if data on the US foreign trade balance point to an increase in the balance deficit, while world prices for dairy products will rise again, we should expect further growth of the NZD / USD.

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 Support levels: 0.7240, 0.7200, 0.7120, 0.7000, 0.6865, 0.6800

Resistance levels: 0.7328, 0.7400, 0.7430, 0.7500, 0.7550


Trading Scenarios

Sell Stop 0.7250. Stop-Loss 0.7340. Take-Profit 0.7200, 0.7120, 0.7000, 0.6865, 0.6800

Buy Stop 0.7340. Stop-Loss 0.7250. Take-Profit 0.7400, 0.7430, 0.7500, 0.7550

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