NZD/USD: Kiwi Learns to Fly Amid RBNZ's No Change Verdict

[Guest Michal Vajcik]

http://bit.ly/1L2XMdl

 

The kiwi continued to trade with a massive gain against the US dollar on Thursday afternoon, jumping well above its four-year low after the the Reserve Bank of New Zealand (RBNZ) made no change to its policy rate earlier in the day.

 

The NZD/USD pair rallied 1.67% to $0.7412, advancing from bottom at $0.7192 seen yesterday night.

 

Meanwhile, sluggish US macro data had little impact on the cross, causing only a minor drip from its daily high. First, US retail sales missed expectations in February, as the latest report showed a deterioration of 0.6% month-on-month, although slightly better than the 0.8% fall posted in January.

 

Later in the day, the number of initial jobless claims hit 289,000 for the week ending March 7, sliding from an upwardly revised 325,000 seen in the previous week, while business inventories remained flat in January.

 

RBNZ decision

 

The RBNZ left its overnight cash rate at 3.5% and the 90-day bank bill track unchanged into early 2017, which signals that they foresee no rate cuts, or hikes, at least until then.

 

The decision to hold comes as inflation consistently runs below the bank's forecasts, and last quarter slipped below the RBNZ's 1-3% target band. With inflation unlikely to move much higher in the short term, the bank is unable to continue hiking interest rates as it did throughout the first half of last year.

Technical analysis

 

Together with the aussie, the kiwi was strongly sold off from the peak around $0.76 where it was trading just few days ago. The first support in sight is around $0.7190 where a major reversal occurs and as an intraday resistance now acts a level of previous support at $0.7440.

 

Long-term daily charts are on the way down and have a lot of zones below the previous swing low of $0.7150, possibly supporting the currency cross from a sharp sell-off. The most important level lies at the big round and psychological figure of $0.7000.