New Zealand Dollar: NZD/USD (NZD=X) RBNZ on course for an interest rate cut in August

New Zealand Dollar: NZD/USD (NZD=X) RBNZ on course for an interest rate cut in August

New Zealand Dollar: NZD/USD (NZD=X) RBNZ on course for an interest rate cut in August

The idea that the RBNZ could be moving towards QE has weighed on the bird in Asia today, as markets are looking for clues as to which of the central bank will be the first to the bottom. So far, the RBNZ has been the most forthcoming with its easing intentions. The RBNZ last cut its cash rate by 25 basis points in May, but at the last meeting around, where the RBNZ left its cash rate at 1.5 per cent in June, as widely expected, it did firmly signal that it may lower the cash rate in the future. 

“The RBNZ bought themselves some time with the 25 basis point cut in May, which wasn’t priced and was delivered nine months earlier than the staff forecasts projected. The sand is rapidly running out of the hourglass now, however, as global policy rates are on the move,” said JPMorgan economist Ben Jarman.

Conventional wisdom says the Reserve Bank’s monetary policy committee will likely cut again in August when it will have had move information to justify another reduction. Indeed, the move toward lower rates globally, coupled with weak domestic economic data, makes a case for the RBNZ  to do so.  

5 unconventional monetary policy plans

Casting minds back to a bulletin issued all the way back on 4 May 2018, the RBNZ outlined 5 unconventional monetary policy plans the RBNZ could implement in case of a crisis. Including that the RBNZ is prepared to print money.  

The bulletin entitled “Aspects of implementing unconventional monetary policy in New Zealand” outlined these 5 potential tools:

  1. Negative interest rates: the OCR could be cut to as low as -0.75%
  2. Forward guidance: the RBNZ would clearly signal its intentions
  3. QE: the RBNZ would consider buying large amounts of government and corporate bonds on the secondary market, and potentially foreign government bonds
  4. Interest-rate swaps: the RBNZ could use this market to influence broader interest rates
  5. Term lending facilities for banks: the RBNZ would lend to banks against collateral, guaranteeing them liquidity

“While there is no need to introduce unconventional monetary policies in New Zealand at this time, it is prudent to learn from other countries’ experiences and examine how such polices might work in New Zealand if the need arises,” – authors of the paper at the RBNZ

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 0.67.

The projected upper bound is: 0.68.

The projected lower bound is: 0.66.

The projected closing price is: 0.67.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 53.3546. This is not an overbought or oversold reading. The last signal was a sell 0 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 54.47. 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 43 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 43. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 6 period(s) ago.

Rex Takasugi – TD Profile

FOREX NZD= closed down -0.005 at 0.670. Volume was 20% below average (neutral) and Bollinger Bands were 8% narrower than normal.

Open High Low Close Volume___
0.676 0.676 0.670 0.670 30,319

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period     50-period     200-period
Close: 0.67 0.66 0.67
Volatility: 9 9 10
Volume: 34,254 36,300 43,348

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.

Summary

FOREX NZD= is currently 0.2% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of NZD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on NZD= and have had this outlook for the last 23 periods.

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