NZD/USD ignores expected RBNZ outcome, bid post FOMC
- NZD/USD profit taking continues after a dovish near-term outcome post FOMC.
- NZD/USD ignores steady-as-you-go RBNZ, expected as a non-event.
As widely as expected, the RBNZ holds the Official Rate Cash at 1.75% and there were no mentions of the Kiwi in the statement. Currently, NZD/USD is trading at 0.7231, up 0.67% on the day, having posted a daily high at 0.7248 and low at 0.7153.
There was a slight bid on the knee-jerk, inline with a minor recovery attempt by the bears post the FOMC hawkish far end, dovish short term on the dot plot chart after today's rate decision where the dollar was sold off.
"The Fed is withdrawing stimulus gradually, but that is not dramatically changing the USD picture just yet," explained analysts at ANZ, adding, " however, the global liquidity cycle is clearly turning, and the associated lift in volatility will leave the NZD on the back-foot."
The FOMC today
The US dollar dropped on the FOMC announcements after the Fed raised their target interest rate to 1.50-1.75 pct, but only seeing two more rate hikes this year for a total of three, not four, (sees three more in 2019, that were previously at just two hikes).
Key notes form the statement as follows:
- Raises view of estimated neutral fed funds rate following years in which it lowered estimates.
- Median projection sees fed funds rate at 2.875 pct at end-2019 compared with 2.688 pct in dec forecast.
- Says economic outlook has strengthened in recent months.
- Says inflation on 12-month basis is expected to move up in coming months.
- Says economic activity has been rising at 'moderate rate;' previously described rate as 'solid'.
- Says job gains have been strong; growth rates of household spending and fixed investment have moderated.
- Repeats near-term risks to the economy appear "Roughly balanced".
- Fed vote in favor of policy was unanimous.
NZD/USD levels
NZD/USD recovered from the 200-day moving average support at 0.7183 and technicals have turned bullish short-term, whereas the daily sticks remain bearish/neutral with a slight recovery in the RSI to the upside. However, the bird needs to get back above the 10, 21 and 55-DSMAs for a clearing of the descending trendline resistance last breached at the 0.7300 level on 12th March. Closes need to occur above 0.7320 with the 21-D SMA falling in at 0.7267 and the 50-D SMA 0.7293 as the first major hurdles.