Market Analysis

The RBNZ could struggle to maintain it’s neutral policy tone

The New Zealand Dollar has been outperforming in the foreign exchange market due to the RBNZ perceived neutral stance towards monetary policy, while United States, UK, Australian, Swiss, Canadian, European and Japanese central bankers are turning dovish as global growth decelerates. If the RBNZ keep their policy statement unchanged from the previous monetary statement, the New Zealand Dollar is likely to see further appreciation.

The policy language from the RBNZ will be the most closely watched part of this weeks rate decision, with any mentioning of a downward revision of the central bank’s growth and rate forecasts will likely signal that a bearish shift is taking place amongst Reserve Bank members. Most economists have stated that if the central bank does start to strike a more bearish tone, then November would be the expected date of a potential rate cut.

Since the last policy decision the New Zealand economy has posted mixed economic data, with business confidence and retail sales falling, while dairy prices, GDP and manufacturing data outperformed. It now remains to be seen if the RBNZ will fall in-line with other central banks and start to take note of the bearish signals coming from global bond markets.


NZD/USD Daily Mountain Chart | Source: ActivTrader Platform

NZD/USD Daily Mountain Chart | Source: ActivTrader 


The 0.6744 level appears to be line-in-the-sand for the NZD/USD pair, with bulls likely to remain in control until this key support area is broken. A technical breakout above the 0.6940 and the November 2018 trading high could spark a wave of technical buying in the kiwi towards the 0.7058 resistance area.


Written by Nathan Batchelor, External Analyst


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