New Zealand Dollar, NZD / USD, NZD / JPY, Central Bank of New Zealand, NZ Q3 Inflation – Talking Points:
- Upcoming inflation data for the third quarter can determine the short term outlook New Zealand Dollar
- NZD / USD eyeing a push to support at 100-DMA.
- NZD / JPY interest rates loop ahead of major economic data releases.
Upcoming Inflation Data to Dictate NZD
Upcoming inflation data is likely to dictate the New Zealand Dollar’s short-term outlook, after a series of better-than-expected economic releases questioned the need for further stimulus from ultra-dovish Reserve Bank of New Zealand.
The RBNZ has stated that it is “actively preparing an additional package of monetary policy tools to use if needed [and] reaffirmed that the Funding for Lending Program (FLP), lower or negative OCR, foreign asset purchases, and interest rate swaps are still under consideration ”.
In addition, Governor Adrian Orr has stated that he would “prefer to tackle the quality problem of curbing high inflation rather than the real challenge of fighting deflation”, adding that he has called on commercial banks to be prepared for the adoption of negative interest rate policies and there is still “plenty of room” left in the central bank’s quantitative easing (QE) program.
However, with Prime Minister Jacinda Ardern easing all restrictions imposed by the coronavirus at the end of September and recent economic data showing the nation’s recovery is gathering momentum, the need for additional monetary support may not be as bad as previously thought.
The New Zealand services and manufacturing PMI index improved, and business confidence rose to its highest level since February this year, in September.
However, with Assistant Governor Christian Hawkesby confirming that the RBNZ is not playing a “bluff game” when it comes to applying negative rates, further easing is likely to occur in the near term.
To that end, the upcoming inflation data could dampen the stakes in the short term and allow the New Zealand Dollar to move higher against the majors, should the third quarter figures surprise upwards.
On the contrary, a disappointing release is likely to justify the need for additional action from the RBNZ and in turn significantly damage the local currency.
Recommended by Daniel Moss
Building Confidence in Trading
NZD / USD Daily Chart – Eyeing 100-DMA Support
From a technical perspective, NZD /USD the exchange rate could be at risk of extending its fall from set annual highs in September (0.6798), as price cuts through support at trend-defining 50-day MA (0.6612) and the RSI falls back below its neutral midpoint.
A short-term pullback to confluent support at 100-DMA (0.6552) and an uptrend extending from the June 22 swing-low (0.6383) looks likely in the coming days, if the psychologically impressive 0.6600 figure continues to hold. buying pressure.
On the other hand, a daily close above 21-DMA (0.6620) might produce an impetus to test monthly highs (0.6682), with a break of resistance at the 0.6700 mark needed to carve out a path to test yearly highs. (0.6798).
The NZD / USD daily chart is created using TradingView
NZD / JPY Daily Chart – Coiling Up Below 50-DMA
NZD /Yen Interest rates may also slip lower in the coming days, if 21 MA (69.84) and MA 50 (69.91) continue to suppress the bullish momentum.
The development of the RSI and MACD indicators is hinting at swelling selling pressure, as both oscillators track strongly below their respective neutral midpoints.
A daily close below the sentiment-defining 200 DMA (69.37) will likely trigger the impetus to test August lows (68.76) and Upside Channel support, with a break below needed to cancel bullish continuation pattern and bring June lows (68.16) )) be in focus.
Conversely, a push back above its 50 MA (69.91) and an expanding downtrend from September highs (71.98) could trigger a broader recovery from September lows (68.63) and open doors for a retest of August highs (71 , 71).
NZD / JPY daily chart created using TradingView
– Written by Daniel Moss, Analyst for DailyFX
Follow me on twitter @Tokopedia
Recommended by Daniel Moss
Improve your trading with IG Client Sentiment Data
to request modification Contact us at Here or [email protected]