New Zealand Dollar: NZD/USD (NZD=X) sharply higher after wholesale interest rates spiked after the Reserve Bank left its official cash rate (OCR) unchanged
The New Zealand Dollar finished the week sharply higher after wholesale interest rates spiked after the Reserve Bank left its official cash rate (OCR) unchanged at 1 percent. Market expectations were weighted towards a rate cut at today’s monetary policy statement.
Analysts described the RBNZ’s decision as a surprise with several indicating the central bank’s new growth outlook still appears too rosy. The financial markets are now pricing in a February or May rate cut. To some, the market reaction showed the positioning ahead of the policy announcement was clearly the wrong way.
The RBNZ, in its statement, said further monetary stimulus would be added if needed. It said employment remained around its maximum sustainable level while inflation remained below the 2 percent target midpoint but within its target range.
“Economic developments since the August statement do not warrant a change to the already stimulatory monetary setting at this time,” it said.
The key economic reports this week are the RBA Monetary Policy Meeting Minutes on Tuesday and Friday’s ISM US Flash Manufacturing PMI report.
However, most of the focus this week will be on the progress of the U.S.-China trade talks after last week ended on an optimistic note with high ranking U.S. officials pushing all the positive news buttons.
White House economic adviser Larry Kudlow said on Thursday that negotiations over the first phase of a trade agreement with China were coming down to the final stages, with the two sides in daily contact.
U.S. Commerce Secretary Wilbur Ross said in an interview on Fox Business Network Friday that there was a very high probability the United States would reach a final agreement on a phase one trade deal with China.
Furthermore, there was a potentially bullish development over the week-end. According to Chinese state media, Chinese Vice Premier Liu He spoke with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer about a phase-one trade deal in a phone call Saturday morning.
The two sides had “constructive discussions” about “each other’s core concerns” and agreed to remain in close contact, Xinhua reported. The call came at the request of Mnuchin and Lighthizer, according to Xinhua.
Nonetheless, there are still skeptics out there. “To be blunt, such rhetoric is more or less the same as Steven Mnuchin (who) said months ago that a deal was ‘99% done’, Commerzbank analysts wrote in a note to clients, though they acknowledged the comments had benefited sentiment.
Aussie and Kiwi traders are going to continue to make adjustments to their positions in reaction to the chances of further rate cuts by the RBA and RBNZ, respectively. However, most eyes will be on the progress of the trade talks that could make bearish traders forget about the problems in the Australian and New Zealand economies, at least over the short-run.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 0.64.
The projected upper bound is: 0.65.
The projected lower bound is: 0.63.
The projected closing price is: 0.64.
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 24 white candles and 26 black candles for a net of 2 black candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
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 75.2477. This is not an overbought or oversold reading. The last signal was a buy 4 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 55.05. 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 40 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 61. This is not a topping or bottoming area. The last signal was a buy 5 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 buy 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX NZD= closed up 0.000 at 0.640. Volume was 98% below average (consolidating) and Bollinger Bands were 46% narrower than normal.
Open High Low Close Volume___
0.640 0.641 0.640 0.640 627
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.64 0.63 0.66
Volatility: 10 9 9
Volume: 25,937 30,034 35,912
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 2.5% 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 26 periods.