RBNZ’s interest rate decision sends the Kiwi higher

RBNZ remained on hold as expected at 1.00%, yet the accompanying statement made the Kiwi jump against the USD during today’s Asian session. In its accompanying statement the bank left out a line which indicated the bank’s readiness to add further monetary stimulus to New Zealand’s economy if needed, while at the same that in its forecasts, it seems to reject the idea of a possible rate cut for 2020. The bank also noted the emerging risk of the new Coronavirus, yet in his press conference RBNZ Governor Orr, stated that the working assumption is for some renormalization to be expected over March. If the two prior points are to be combined one could conclude that the bank seems to plan to remain on hold at 1.00% for 2020, unless the Coronavirus effect comes out of proportions. Analysts tended to note the hawkish shift of the bank while at the same time underscored the bank’s forecasts for a possible rate hike in late 2021, as supportive argumentation. We also find the whole event as supportive for the Kiwi not only for shorter term but may have also a wider reaching effect albeit less intense. NZD/USD jumped during today’s Asian session, breaking the 0.6440 (S1) resistance line, now turned to support. As the pair clearly broke downward trendline incepted since the 5th of the month, we switch our bearish outlook for the pair, in favour initially of a sideways movement. Please note that we consider a correction lower as still possible for the pair after today’s spike. Should the pair come under the selling interest of the market we could see the pair once again breaking the 0.6440 (S1) support line aiming for the 0.6390 (S2) support level. Should the pair’s long positions be favoured by the market, we could see the pair breaking the 0.6490 (R1) resistance line, aiming for higher grounds.

Pound ascents slightly on improved readings

The pound gained against the USD yesterday, as UK readings regarding GDP, manufacturing and trading activity were deemed as quite positive. The readings where either in line with expectations or outperformed them providing a slight boost for the pound. Characteristically the preliminary GDP readings for Q4 on a year on year basis remained unchanged instead of slowing down, while the manufacturing output growth rate accelerated getting out of the negative area, albeit not reaching its target. Maybe the biggest surprise of the releases was the trade balance which turned into a surplus for the first time in over 20 years. Analysts tend to note that the readings may be easing the pressure on BoE for any rate cuts any time soon and tend to improve the outlook for the pound, yet we would also add that they concern a very volatile period for the UK, specifically the last months before Brexit and during the UK elections. We could see the pound strengthening over the next few days, yet the situation remains uncertain, as negotiations with the EU may still pull it downwards. GBP/USD ascended slightly yesterday aiming for the 1.3015 (R1) resistance line. Technically the main characteristic of yesterday’s movement was the breaking of the downward trendline incepted since the 31st of January, forcing us to switch our bearish outlook for the pair in favour of a sideways movement. Should the pair come under the control of the bulls, we could see it breaking the 1.3015 (R1) resistance line. On the other hand, if the bears maintain control, we could see cable breaking the 1.2820 (S1) support line.

Other economic highlights today and early tomorrow

During the European session, we get from Sweden, Riksbank’s interest rate decision and Eurozone’s industrial production growth rate for December. In the American session we get the EIA crude oil inventories figure, while during Thursday’s Asian session, we get Japan’s PPI rate for January. As for speakers, Philadelphia Fed’s Harker, San Francisco Fed’s Daly, Fed Chair Powell and BoC Governor Poloz speak.

NZD/USD 4 Hour chart