NZD/USD bulls riding the pull back in the greenback, eyes 0.6670
The greenback lose ground on a recovery in the Chinese Yuan, despite a 4% decline in the Lira, but was mostly sold off due to poor data and the resumption of trade talks between China and the US which means less inflationary pressures in the US that the Fed might otherwise have to act faster in order to deal with, if indeed higher import prices due to Chinese tariffs made their way through into the wider economy via retail prices - so goes the logic.
There was an improved risk sentiment on Wall Street which leant a hand over to the commodity complex where the Kiwi managed to ride the coattails of.
"Whether anything comes of the talks remains to be seen (and they aren’t until November), but with the kiwi looking oversold on some short-term technical indicators we could see some mild retracement this week," analysts at ANZ argued who are no longer forecasting that the next move in the OCR will be up.
The Reserve Bank is reluctant to hike
"The Reserve Bank is reluctant to hike; they made that abundantly clear in the recent Monetary Policy Statement. And we see growth averaging 2½% over the next couple of years; hardly a stall, but considerably softer than the Reserve Bank’s expectation. That combination is not consistent with forecasting rate hikes. We are now forecasting that the OCR will be flat for the foreseeable future. Of course it is not that we literally believe the OCR will never be moved ever again; rather, we no longer believe on balance that the next move will necessarily be upwards. Indeed, given how long it is until a hike could plausibly be on the cards, the balance of risks is, if anything, tilted towards the next move being a cut. But the economy is muddling through for now. We still expect core inflation to rise further in the near term, reflecting previous strength in the economy. But beyond that, the resilience of underlying inflation does not look assured."
Support 0.6510 Resistance 0.6670
Support is seen at 0.6510 while resistance is located at 0.6670. There is an argument for the upside while indicators have resurfaced from out of oversold territory and bulls can target resistance at 0.6670. 0.6860 comes next ahead of 0.6920 as the June high can be had. The 200-month moving average resistance is at 0.7020. However, on the downside, 0.6510/50 guards a run to the 0.6470s and below there, 0.6240 remains as a big level that protecting the double bottom lows at 0.5910 (2004 and 2006 levels).