Bulls Power NZDUSD To 1 Year High After RBNZ Keeps Rate Unchanged
On Thursday (9/6), the NZ dollar soared to a one-year high against its US counterpart after the Reserve Bank of New Zealand decided to hold the benchmark rate unchanged at 2.25% for the straight third month.
New Zealand’s housing prices have recently been climbing rapidly, due to low interest rates, high levels of immigration and supply shortages. This has rung alarm bells over the possibility of a housing market bubble, which would hurt the country’s financial system adversely. With an aim to control rallying house prices, Reserve Bank governor Graeme Wheeler signaled that more lending restrictions could be imposed on property investors. These RBNZ moves contributed to the significant 2% surge in the kiwi to $0.71472.
According to data from Statistics New Zealand on Wednesday (8/6), the volume of total manufacturing sales fell by 1.2% in the first quarter, with meat and dairy product manufacturing volumes falling 7.8%. Meanwhile, inflation, which is currently at 0.4%, still runs below the central bank’s annual inflation objective range of 1%-3%. The possibility of an interest rate cut at the August meeting is still on the table with the market pricing in the odds of a cut at 40%.
In the U.S, yesterday, the Labor Department reported Job Openings and Labor Turnover Summary for April. The number of job openings came in at 5.79 million, beating the estimate of 5.67 million. The increase in available jobs raises hopes that hiring could rebound this summer after the spring slowdown and relieves the worries over labor market slack.
However, recent positive statistics can hardly alter investors’ expectation for no rate hike at the FED’s monetary policy meeting next week. In the Asian trading session on Thursday, the dollar index DXY, which tracks the value of the greenback against a basket of currencies, lingered around a one-month low of 93.48.
Markets are keeping a close eye on US Prelim Consumer Sentiment data and Inflation Expectations data which will be published on Friday (10/6). The FED policy meeting is still in the spotlight for clues on the FED’s projections for the US economy and its stance on rate hikes.
Fig. NZDUSD D1 Technical Chart
On the daily chart, the kiwi is soaring strongly against the greenback, pushing the pair to a one-year high of 0.71472. RSI (14) is climbing to 71.8112, signaling that bullish power is dominant. ADX (14) is up to 36.1916 along with DI+ staying above DI-, consolidating the up-move. The trend indicator supports a long position with a green arrow appearing under the price chart. The pair is anticipated to continue climbing for some time.
Buy stop 0.71415, Take profit at 0.71749, Stop loss at 0.70932.