NZDUSD: Near-term support remains in the 0.6960-0.6990 window - BNZ

Kymberly Martin, Senior Market Strategist at BNZ, notes that the NZD/USD received an unexpected knock lower yesterday morning after the RBNZ released an unscheduled paper outlining proposed further LVR restrictions.

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“As the market assessed these as providing the RBNZ with more leeway to cut the OCR (to address undershooting inflation) the NZD fell sharply.

From 0.7120 the NZD/USD found support at 0.7020 overnight. The flat result in the GDT dairy auction in the early hours of this morning prompted little discernable response from the currency. Technically, near-term support for the NZD/USD remains in the 0.6960-0.6990 window.

In the absence of any further surprises, the next challenge for the NZD will be tomorrow morning’s intra-meeting economic update from the RBNZ. The NZ TWI is still 6% above the RBNZ’s projected average for this quarter. We anticipate the RBNZ will make very clear that if this level sustains it will provide a serious impediment to achieving its medium-term inflation target. It’s hard to see the RBNZ’s update providing anything to support the NZD.”