Despite Pending RBNZ Rate Cut 'Kiwi' Technicals Call for No Trade

The RBNZ is expected to cut rates by 100 bps as they try and head off a recession. The New Zealand economy has seen growth decline faster than expected as the credit crisis combined with record high interest rates stifled growth.

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Fundamental Outlook
The RBNZ is expected to cut rates by 100 bps as they try and head off a recession. The New Zealand economy has seen growth decline faster than expected as the credit crisis combined with record high interest rates stifled growth. Additionally, the slowing global economy has weighed on demand for raw materials and sunk commodity prices, which are the exports that drive the New Zealand economy. Despite the traditionally bearish nature of a rate cut, the ‘Kiwi” technical outlook is calling for restraint and to stand on the sidelines. A rate cut should trigger enough event risk to trigger a trade, but bearish bets should be watched carefully as a reversal could follow.

                                                                                                                                    

Technical Outlook

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The short term NZDUSD chart looks the same as the AUDUSD short term chart.  A triangle appears to be unfolding.  However, it is not clear where a triangle would fit within the larger pattern (shown above).  My long standing target of below .5927 has already been registered, so a larger recovery could be underway.  For now, it is best to stand aside with this pair.

 

For More Technical Analysis Visit the Daily Technical Report

 

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com