RBNZ also expected to remain on hold

JPY continued to weaken against the USD as the better-than-expected ISM Mfg PMI figure for September boosted the greenback across the board yesterday. On the other hand, BoJ’s dovish monetary policy continues to weigh on JPY, with USD/JPY reaching very high levels, an issue that may prompt Japan to proceed with a market intervention to support JPY. RBA remained on hold at 4.10% this morning disappointing AUD traders. Governor Bullock’s accompanying statement overall did not show any signs of active intentions for further tightening although it was noted that the bank may proceed with another rate hike if it’s necessary. We expect the monetary outlook to weigh on AUD, yet the Aussie may also be heavily influenced by the market’s general sentiment.

RBNZ is to release its interest rate decision during tomorrow’s Asian session and is widely expected to remain on hold keeping the cash rate at 5.5% with NZDOIS implying an 89% probability for such a scenario to materialize. Should the accompanying statement show no willingness on behalf of the bank for further tightening we may see the Kiwi slipping.

NZD/USD continues to drop nearing the 0.5890 (S1) support line. We tend to maintain a bearish outlook for the pair as long as it remains below the downward trendline initiated since the 29^th of September and given that the RSI indicator has neared the reading of 30, implying a bearish sentiment for the pair on behalf of the market yet the pair may be nearing oversold levels. Should the bears maintain control over the pair we may see NZD/USD breaking the 0.5890 (S1) support line and aim for the 0.5820 (S2) support base. Should the bulls take over, we may see the pair reversing course, breaking the prementioned downward trendline in a first signal that the downward movement has been interrupted and continue higher by breaking the 0.5980 (R1) resistance line and aiming for the 0.6050 (R2) resistance nest.  

Market worries for the economic outlook of the Eurozone continue to weigh on the common currency and Germany’s outlook comes under special focus. The expected prolonged period of ECB’s high-interest rates in combination with high energy prices are expected to have an adverse effect on Germany’s manufacturing sector, which is suffering a continuous contraction of economic activity for a number of months now. 

On the commodities front, oil prices tended to drop in another sign of an easing of an overcrowded long position, while at the same time, the stronger US Dollar tended to weigh on oil prices. We expect OPEC to maintain low production levels tomorrow, yet for the time being the bearish sentiment seems to emerge for oil’s price. 

Brent’s price dropped and broke the 90.85 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the commodity’s price given that it was able to break the lower boundary of its past sideways motion and the RSI indicator has reached the reading of 30, implying a bearish sentiment for Brent. Should the selling interest be maintained, we may see Brent’s price moving lower, breaking the 87.40 (S1) support line and aiming for the 82.25 (S2) support level. Should buyers be in control over the commodity’s price, we may see it breaking the 90.85 (R1) resistance line and aiming if not breaching the 95.15 (R2) resistance level.

Other highlights for the day:

Today we note the release of the CPI rates for September of Switzerland and Turkey in the European session, while ECB’s Chief Economist Lane is scheduled to speak. In the American session we note the release of New Zealand’s Milk auctions and from the US we highlight the release of August’s JOLTS job openings and just before the Asian session starts we get the weekly API crude oil inventories figure.

NZD/USD 4 Hour Chart

Support: 0.5890 (S1), 0.5820 (S2), 0.5740 (S3)

Resistance: 0.5980 (R1), 0.6050 (R2), 0.6120 (R3)

Brent 4 Hour Chart

Support: 87.40 (S1), 82.25 (S2), 78.00 (S3)

Resistance: 90.85 (R1), 95.15 (R2), 98.90 (R3)

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