Weak Kiwi awaits RBNZ’s interest rate decision

Tomorrow during the Asian session (01:00, GMT), RBNZ is to release its interest rate decision and is expected to remain on hold at +1.00%, while NZD OIS imply a probability of 88.49% for the bank to do so. Should the bank remain on hold as forecasted, we could see the market turning its attention to the accompanying statement and Governor Orr’s following press conference (02:00, GMT). With inflation accelerating and close to the bank’s median target, the GDP rate also accelerating and unemployment remaining at low levels, there seem to be some grounds for optimism about New Zealand’s economy. On the other hand, the threat of the new coronavirus with all the possible adverse side effects, seems to be advising caution for the bank. We could see some constraint optimism and a less dovish tone from the bank, which could provide some support for the NZD, on the other hand should the bank fail to do so we could see the Kiwi plunging. NZD/USD continued to weaken yesterday, struggling with the 0.6390 (S1) support line. We maintain a bearish outlook for the pair’s direction as the pair seems to remain under the spell of the downward trendline incepted since the 5th of February. Please note that fundamentals about RBNZ’s interest rate decision tomorrow and Powell’s speech, could affect the pair’s direction. Should the pair remain under the selling interest of the market, we could see it breaking the clearly below the 0.6390 (S1) and aim for the 0.6340 (S2) support level. On the flip side, should the pair’s long positions be favoured by the market, we could see it breaking the prementioned downward trendline and aim for the 0.6440 (R1) resistance line.

USD remains supported ahead of Powell’s speech

The USD remained supported against a number of its counterparts yesterday and analysts tended to note that coronavirus fears may have caused some safe haven inflows for the greenback. It should be noted that US treasury debt seems to be enjoying increased demand, which could be a result of exactly the prementioned coronavirus fears. On the other hand, the greenback had a number of positive readings past week and confidence in the US economy seems to remain strong. Greenback traders could be turning their attention to Powell’s first of two testimonies before the US Congress later in the American session today (15:00, GMT). Should the Chair of the Fed confirm the market’s confidence we could see the USD strengthening further and vice versa. EUR/USD dropped further breaking the 1.0940 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair as downward trendline, incepted since the 3rd of the month remains intact. Should the pair come under the control of the bulls, we could see it breaking the 1.0940 (R1) resistance line and aim for the 1.0990 (R2) resistance hurdle. On the other hand, if the bears maintain control, we could see EUR/USD breaking the 1.0885 (S1) support line and aim for the 1.0830 (S2) barrier.

Other economic highlights today and early tomorrow

During the European session, we get a slew of data from the UK such as the GDP growth rates for Q4, the manufacturing output for December and the trading balance for the same month. It’s expected to be in the American session and just before the Asian session, we get from the US the API weekly crude oil inventories figure. During Wednesday’s Asian session, we get Australia’s consumer sentiment for February. There are a number of speakers scheduled for today and from the BoE the main speakers are to be Cunliffe, Governor Mark Carney and Haskel, while from the ECB main speakers scheduled for today are ECB President Christine Lagarde, Schnabel and Lane. From the Fed we start the day with Fed’s Chair Powell testifying before the US Congress, followed by Quarles, St. Louis’s Bullard (18:30, GMT) and Minneapolis Fed President Kashkari.

NZD/USD 4 Hour chart