NZD/USD – New Zealand Dollar Breaks Above 70, RBNZ Rate Announcement Next

NZD/USD has posted considerable gains on Wednesday, continuing the upward movement seen in Tuesday session. The pair is trading at the symbolic 0.70 line in the North American session. On the release front, New Zealand Manufacturing Sales disappointed with a decline of 2.6% in the first quarter. This follows a decline in the previous quarter, pointing to ongoing contraction in the New Zealand manufacturing sector. Later in the day, the New Zealand central bank will announce its benchmark interest rate. The markets are expecting a quarter point cut, from 2.25% to 2.00%. The RBNZ will also release a monetary policy statement, which is published each quarter. Over in the US, today’s key event is JOLTS Jobs Openings. The employment indicator is expected to dip to 5.67 million. We’ll also get a look at Crude Oil Inventories, with the markets expecting a strong decline of 3.2 million barrels. On Thursday, the US releases Unemployment Claims.

Will the New Zealand central bank press the rate trigger on Wednesday? The RBNZ is expected to lower rates to an even 2.00% at its policy meeting. The RBNZ surprised the markets in March, cutting rates from 2.50% to 2.25%. A rate cut could help lift inflation levels, but the housing market remains overheated and could pose a danger to the economy. The RBNZ has been reluctant to lower rates, as such a move could exacerbate the housing situation. However, the economy is in need of help, and the markets are expecting the RBNZ to step in on Wednesday and cut rates for the first time since January. A rate cut would make the New Zealand currency less attractive to investors, so the kiwi could lose ground if the RBNZ makes a move.

Federal Reserve Chair Janet Yellen delivered a closely-watched speech on Monday, but the markets were disappointed with her lack of specifics, and EUR/USD showed no movement. Speaking at the World Affairs Council in Philadelphia, Yellen said she remained optimistic about the US economy and hinted that the Fed would raise interest rates, but crucially, she gave no indication as to when that might occur. This omission was in sharp contrast to her remarks just over a week ago, when she declared that a hike would likely be appropriate “in the coming months”. Yellen was cautious in her tone on Monday, saying “[i]f incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective as I expect, further gradual increases in the Federal Funds Rate are likely to be appropriate”.  Yellen played down the dismal Nonfarm Payroll report, saying that the markets shouldn’t attach too much significance to one soft report. The markets had lowered expectations for a June rate hike after the dismal NFP report on Friday, and Yellen’s speech has all but priced a rate hike at next week’s Fed policy meeting. However, a rate increase in July or September remains on the table, and any decision by the Fed to raise or maintain rates will be data-dependent, particularly on inflation and employment data.

Is the US labor markets in trouble? After Friday’s earthquake, when NFP plunged to a paltry 38 thousand, employment numbers are under the market microscope. On Monday, the Labor Market Conditions Index dropped 4.9 points, marking a fourth consecutive decline. This was followed by Revised Nonfarm Productivity, which dropped 0.6%. These soft figures were not a major surprise, coming on the heels of a dismal Nonfarm Payrolls report. Still these are minor indicators, and the markets are keeping a closer eye on JOLTS Job Openings, an important event. If this indicator misses expectations, concerns over the US economy will intensify, and the US dollar could lose continue to lose ground.

NZD/USD Fundamentals

Tuesday (June 7)

• 18:45 New Zealand Manufacturing Sales. Actual -2.6%

Wednesday (June 8)

• 10:00 US JOLTS Job Openings. Estimate 5.69M
• 10:30 US Crude Oil Inventories. Estimate -3.2M
• 13:01 US 10-year Bond Auction
• 17:00 New Zealand Official Cash Rate. Estimate 2.00%
• 17:00 New Zealand RBNZ Rate Statement
• 17:00 New Zealand Monetary Policy Statement
• 17:00 RBNZ Press Conference
• 21:10 RBNZ Governor Graeme Wheeler Speaks

Upcoming Key Events

Thursday (June 9)

• 8:30 US Unemployment Claims. Estimate 269K

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Wednesday, June 8, 2016

NZD/USD June 8 at 9:00 EDT

Open: 0.6948 Low: 0.6838 High: 0.7018 Close: 0.7000

NZD/USD Technical

• NZD/USD has posted slight gains in the Asian and European sessions
• 0.7011 is under strong pressure in resistance. This line was tested earlier and could break in the North American session
• 0.6897 has strengthened in support as NZD continues to move higher

Further levels in both directions:

• Below: 0.6897, 0.6738, 0.6621 and 0.6542
• Above: 0.7011, 0.7100 and 0.7231
• Current Range: 0.6897 to 0.7011

OANDA’s Open Positions Ratio

The NZD/USD ratio is unchanged on Wednesday, despite gains by NZD/USD. Short positions have a slight majority (53%), which is indicative of a slight trader bias towards NZD/USD reversing directions and moving to lower levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.