RBNZ preview: what to expect in NZD/USD?

NZD/USD has been supported today as we await the outcome of the RBNZ who are are tipped to join the party and about to top up the punch bowl by cutting the OCR today. 

RBNZ back at the party table, about to top up the punch bowl?

NZD/USD has been recovering from a post nonfarm payrolls low of 0.7085 this week and has risen to a high of 0.7264. Markets have returned with a better risk appetite and the commodity bloc had performed well, with oil rising to $43.48, albeit struggling to maintain the bid and dropping towards the 200 sma on the 1hr sticks at $41.39.

Meanwhile, the bird is almost at the highest levels for 2016 and indeed this is going to be of concern to the RBNZ, so much like the RBA, while inflation is one thing, the level of the currency is another matter and while markets might be expecting just a 25bp cut to 2%, that might not be enough to have too much affect on the currency and a 50b cut is not going to be out of the question. 

"Our hawkish scenario (only a 5% chance we think, given the strength of the exchange rate) has the rates track reduced by only 10bp, which could be interpreted as a possible end to the easing cycle. Markets would be disappointed and the NZD would rise 1.5c, 2yr swap rates around 20bp." explained analysts at Westpac. "Finally, we see around zero chance the RBNZ will remain on hold because its interim economic update clearly signalled its intentions," they added, which was for further easing.

NZD/USD levels to monitor

Spot is presently trading at 0.7211, and next resistance can be seen at 0.7212 (Hourly 20 EMA), 0.7224 (Daily Classic R2), 0.7227 (Weekly Classic R1), 0.7266 (Daily Classic R3) and 0.7267 (Daily High). 

Support below can be found at 0.7195 (Daily Classic R1), 0.7182 (Yesterday's High), 0.7176 (Hourly 200 SMA), 0.7174 (Weekly Classic PP) and 0.7173 (Weekly High). 

Regarding candlestick formations, we can see Dark Cloud Cover formation on the 1-hour and a Dark Cloud Cover formation on the 4-hour chart.