New Zealand Dollar: NZD/USD (NZD=X) Firms After RBNZ Leaves Rates Unchanged
Early Wednesday, the RBNZ held its Official Cash Rate (OCR) at 1 percent, as had been widely expected by analysts. This following a surprise 50-basis point cut to the OCR in August.
The RBNZ also added in its statement that new information since August did “not warrant a significant change to the monetary policy outlook.”
Reserve Bank policymakers said its monetary policy committee had discussed the impact of cutting the OCR to 1 percent in August and was “pleased to see retail lending interest rates decline, along with a depreciation of the exchange rate”.
“The members anticipated a positive impulse to economic activity over the coming year from monetary and fiscal stimulus.”
Additionally, in a forward-looking comment, the bank said there were “several key uncertainties affecting the outlook for monetary policy” and a range of possible outcomes.
“Some members noted that ongoing low inflation could cause inflation expectations to fall. Others noted that this risk was balanced by the potential for rising labor and import costs to pass through to inflation more substantially over the medium term.”
But the committee remained “comfortable with the monetary policy stance” it said.
Other Highlights from the RBNZ Monetary Policy Statement
Employment was “around its maximum sustainable level” and inflation remained within its target range but below the 2 percent midpoint, the RBNZ said.
“Global trade and other political tensions remain elevated and continue to subdue the global growth outlook, dampening demand for New Zealand’s goods and services.”
“Business confidence remains low in New Zealand, partly reflecting policy uncertainty and low profitability in some sectors, and is impacting investment decisions.”
Interest rates could be expected to be “low for longer”, it said, amid historically low global long-term interest rates.
“Household spending and construction activity are supported by low interest rates, while the incentive for businesses to invest will grow in response to demand pressures.”
The RBNZ also hoped for more fiscal and monetary stimulus, “if necessary”.
The early strength in the NZD/USD is likely just a relief rally and short-covering by those who bet the RBNZ would cut rates at today’s meeting.
Now the debate begins over a November rate cut. Analysts agree that a November cut is still in the cards although the financial markets have reduced the chances of a rate cut from 92 percent to 76 percent after the meeting.
After the announcements, ASB chief economist Nick Tuffley said, “We continue to expect a 25 basis point cut in November, which today’s statement and meeting summary leave the door open for. But by itself the statement suggests that a November cut isn’t a dead certainty, even though we think it is the highly likely outcome.
“Beyond November we still see the risks as being for further easing next year, given the risks remain stacked towards the Reserve Bank deciding even more stimulus is needed to meet its inflation and employment mandates,” he said.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 0.64.
The projected upper bound is: 0.63.
The projected lower bound is: 0.62.
The projected closing price is: 0.63.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.
An on-neck line occurred. This is a bearish pattern where prices should move lower when the white candlestick’s (i.e., the most recent) low is penetrated.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 37.0129. This is not an overbought or oversold reading. The last signal was a buy 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 35.90. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -99. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.
Rex Takasugi – TD Profile
FOREX NZD= closed up 0.000 at 0.627. Volume was 99% below average (consolidating) and Bollinger Bands were 8% narrower than normal.
Open High Low Close Volume___
0.627 0.627 0.627 0.627 494
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.63 0.64 0.66
Volatility: 9 8 9
Volume: 25,814 31,879 38,356
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX NZD= is currently 5.6% below its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect volume flowing into and out of NZD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on NZD= and have had this outlook for the last 3 periods.