What to expect from RBNZ?
The RBNZ meeting will likely become the most important event of the current week. Monetary policy decision will be announced at 20:00 GMT on Wednesday. What to expect from the event?
Kiwi dollar dipped to 0.7180 in early February on speculation that the New Zealand central bank could lower interest rates in 2015. However, the bears failed to fix below the 0.7200 mark than. In March selling pressure on the kiwi dollar resumed due to the combination of a strong dollar and China’s concerns.
According to the most recent Bloomberg survey, 14 out of 16 economists surveyed expect rate to stay unchanged at 3.5% in March. Two experts forecast a rate cut. No one is even talking about rate hikes these days: it’s almost impossible in an environment of low inflation (+0.8% y/y in Q4, below the 1-3% target range).
However, even if rates won’t be cut today, NZD/USD will remain under bearish pressure. RBNZ only needs to repeat that the national currency’s strength remains “unjustified” and “unsustainable”. Investors will also watch the RBNZ’s 90-day bank bill forecast – it is widely expected to be lowered. This yield is often seen as a proxy for the OCR move.
That’s why we expect the kiwi to stay under selling pressure in any case. As we see from the monthly chart, the pair holds below the major support at0.7330 (38.2% Fibonacci from the 2009-2011 rally). The pair is now forming a long-term double-top. Next bearish targets lie at 0.7000 and 0.6870.
Chart. Monthly NZD/USD