• November MPS review was balanced. RBNZ removed the keyword “up or down.”
• Held OCR unchanged for a 24th month in a row at 1.75%
• Downside risks to the growth outlook remain

The Reserve Bank of New Zealand said the Official Cash Rate (OCR) remains at 1.75 percent. The central bank also said OCR at this level through 2019 and into 2020. In FX NZD remains neutral across the board, whereas NZDUSD rejected at 100EA.

Labor market: The RBNZ acknowledge “We estimate employment to be near its maximum sustainable level.” Governor Orr said, “The labor market is projected to tighten, with the unemployment rate dropping further over 2019 and 2020”.

Inflation: “We project that annual CPI inflation will rise to 2 percent in the December 2018 quarter, but drop back below 2 percent in 2019 when the recent increase in fuel prices drops out of the annual calculation”.

Growth outlook: The Reserve Bank believes “Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth.”.

Read the full Monetary Policy Statement: https://www.rbnz.govt.nz/monetary-policy/monetary-policy-statement.


FX reaction: Following the November RBNZ policy review, the FX market is relatively quiet. In the M5 chart, the NZD is eased initially and later firmed at 0.6780 against the dollar. Overnight the price action was rejected at 0.6820 its 100EMA, which is our first target set yesterday.  The commodity cross NZDCAD rejected at 200MA and AUDNZD remains in the falling streak but manages to hold yesterday’s low. Now focus shifts to 1.0650 level. The other cross NZDCHF is facing stiff resistance at 200MA  (weekly) and 20MA )monthly.

Read here: NZDUSD limited downside approach

AUDNZD: A limited downside approach.

Trade Idea: Buy between market rate (cmp 1.0710) -1.0650 use stop loss below 1.0620 targets 1.0840 and 1.0880

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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