Trades near the lows for the year.
The expectations yesterday was that the RBNZ would raise rates to 0.5% (from 0.25%) at their meeting today with perhaps a surprise of 50 basis points (see post from yesterday here).
However, after the New Zealand Prime Minister Ardern declared a national lockdown after finding a single case of Covid, the market is rethinking the expectations. Westpac now expects the Reserve Bank to keep the OCR on hold saying “there is nothing to be gained from pushing the OCR higher now, rather than waiting for more clarity on the Covid situation”. There are still others who think they will go ahead with the raise in order to address the higher inflation, GDP growth that is higher than the pre-pandemic levels and an overheating housing market.
Nevertheless, the news sent the price of the NZDUSD sharply lower.
In the process, the pair is getting closer to its 2021 low of 0.68802 from July 20. The low price reached 0.68994 so far. That is close to the July 28 low of 0.68982(see the chart above).
Recall from yesterday (see post here
),the pair was trading above a rising trend line but also below a falling trendline. It was also trading above and below its 100 and 200 hour moving averages (blue and green lines). The market was consolidating and waiting for the next shove. That shove was not expected from the Prime Minister’s proclamation.
The lockdown news sent the pair plunging to the downside reaching the recent low levels near 0.68994. In the process, the pair fell below a swing area between 0.69459 and 0.69560.
Through the interest rate decision, watch that area for bias clues. A move above should see additional upside momentum with the 50% of the range since July 20 at 0.69838 as a another target to get to and through.
On a break below the low for the year at 0.6880, the price bias turns more to the downside. Look for lower levels.
There is not a lot of support until the price gets down toward the 0.6800 area(see daily chart below). The price back in September 2020 peaked at 0.67992. It wasn’t until early November that the price was able to get above that level, and start a trend like moved to the upside that ended at the February highs of 0.74642.