RBNZ Preview: One step closer to lift-off and what it means for NZDUSD

Tomorrow at midday Sydney time sees the release of the RBNZ’s MPR which is widely expected to leave policy settings unchanged, including the 0.25% OCR as well as the Large Scale Asset Purchase program (LSAP) and the banks Funding for Lending Program (FLP).

New Zealand

While there are no forecasts or press conferences tomorrow following the release, the RBNZ is expected to endorse current market pricing which currently has 19bps of an interest rate hike priced for November 2021.

The market's pricing of the first RBNZ interest rate rise bought forward following the release of the NZIER survey last week that showed business confidence had risen to a 4 year high, prompting all “big four” local banks to bring forward their rate hike calls to November 2021.

Furthermore, Q2 CPI data to be released this Friday is expected to rise 0.8%, taking the year-on-year rate to 2.9%, the top of the RBNZ’s target band of 1-3%. With no end in sight to supply disruptions, a tight labour market, and house prices up +25.6% year on year, the case for a 2021 lift-off is becoming more compelling by the week.

While such a shift is already mostly priced in, the RBNZ’s endorsement of market pricing would be supportive for the NZDUSD which is displaying signs of a potential double bottom of sorts near .6920, often a good indication that a base is close by.

Should the NZDUSD hold the .6920 double bottom and then regain the 200-day moving average currently at .7068, as well as the cluster of resistance at .7100/20, it would indicate that the NZDUSD has completed a multi-month correction at the June .6921 low (from the February .7465 high) and that a rally towards .7300c is underway.

Aware that should the RBNZ unexpectedly deliver dovish guidance and push back against current market pricing, it would likely result in a break and close below support at .6920/10ish, before a deeper decline towards .6700c.

RBNZ Preview One step closer to lift off and what it means for NZDUSD

Source Tradingview. The figures stated areas of the 13th of July 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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