RBNZ: Less Cautious Than Expected, but Wheeler Drags NZD Down

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  • Overnight, the RBNZ kept its policy unchanged as widely expected. The Bank did acknowledge that CPI inflation softened in Q2 and highlighted that it still remains within the target range. In addition, officials did not push back the timing for the planned hike.
  • The Kiwi did not hold onto its gains for a long duration of time as the currency turned back to trade lower in the following hours.
  • We think that the outlook for the NZD remains negative. The market is currently pricing in the first RBNZ hike for 2018. However, according to New Zealand’s OIS, the Bank’s own forecasts suggest this is far too early. In addition, the market could push its expectations back to be more in line with those of the Bank.
  • NZD/USD did spike higher on the RBNZ rate decision and hit resistance at 0.7370 (R1).This pair did however return these gains and traded lower on Governor’s Wheeler reference to intervention. Given that that the short-term trend remains negative, we expect a dip below the 0.7300 (S1) line to the 0.7260 (S2) support.

Today’s Highlights

  • During the European day, the Norwegian CPI for July will be in focus. The forecast is for the headline and Core rates to have declined. Although this could reverse the NOK’s recent gains, we doubt that it can cause the Norges Bank to shift towards a dovish bias.
  • There is only one speaker on the agenda president of the New York Fed William Dudley. His most recent comments on inflation were in June where he highlighted inflation being low but wages in the labour market continuing to improve.
  • USD/JPY fell below 109.90 (S1) yesterday. However, in the early US session, the rate did rebound back above this barrier.



  • Support: 0.7300 (S1), 0.7260 (S2), 0.7200 (S3)
  • Resistance: 0.7370 (R1), 0.7400 (R2), 0.7460 (R3)



  • Support: 109.90 (S1), 109.45 (S2), 109.00 (S3)
  • Resistance: 110.25 (R1), 111.00 (R2), 111.30 (R3)


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