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NZD/USD & NZD/JPY a Key Juncture Ahead of RBNZ Policy Meeting

NZD/USD & NZD/JPY a Key Juncture Ahead of RBNZ Policy Meeting

David Song, Strategist

Talking Points:

- NZD/USD Sits at Former Resistance Ahead of Reserve Bank of New Zealand (RBNZ)

- Bearish USD/JPY Outlook Favored as Pair Fails to Push Back Above Former Support

- USDOLLAR Remains at Risk of Carving Lower-High as Housing Data Disappoints

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10438.94

10439.47

10427.43

0.03

45.50%

NZD/USD:

  • Watching former resistance around 0.8670-0.8700 for new support ahead of the Reserve Bank of New Zealand (RBNZ) policy meeting on July 23.
  • RBNZ widely expected to deliver another 25bp rate hike; will they continue to normalize beyond July after 2Q CPI fell short of expectations?
  • Long-term bias remains bullish as NZD/USD preserves the bullish trend carried over from 2013; Credit Suisse Overnight Index Swaps (OIS) shows expectations for at least 50bp worth of rate hikes over next 12-months.

USD/JPY:

  • Downward trending channel continues to take shape as USD/JPY fails to push back above former support around 101.80-102.00; another lower-high?
  • Next downside target comes in at 101.20-30 (78.6% Fibonacci retracement); could see a more meaningful run at the 101.00 handle given the string of lower-highs in July.
  • As the Bank of Japan (BoJ) remains reluctant to further expanding its asset-purchase program, the shift in the policy outlook may continue to drive the USD/JPY lower as the Fed retains a dovish tone.

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NZD/USD & NZD/JPY a Key Juncture Ahead of RBNZ Policy Meeting

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USDOLLAR Daily

NZD/USD & NZD/JPY a Key Juncture Ahead of RBNZ Policy Meeting

Chart - Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

  • Dow Jones-FXCM U.S. Dollar Index giving back the advance to 10,438 as Housing Starts & Building Permits disappoint.
  • Lack of momentum to close above 10,440 (78.6% Fibonacci retracement) raises the risk for another lower-high in the USDOLLAR.
  • Downside targets remain favorable as the broader descending triangle from earlier this year remains in play; key hurdle comes in at 10,354, the October low.
  • Following the Humphrey-Hawkins Testimony, looks like Fed will pay closer attention to housing, wage growth & broader labor market data.
  • Interim Resistance: 10,508 (61.8% retracement) to 10,524 (38.2% retracement)
  • Interim Support: 10,354 (Oct. low) to 10,375 (50.0& retracement)

Release

GMT

Expected

Actual

Initial Jobless Claims (JUL 12)

12:30

310K

302K

Continuing Claims (JUL 5)

12:30

2580K

2507K

Housing Starts (MoM) (JUN)

12:30

1.9%

-9.3%

Housing Starts (JUN)

12:30

1020K

893K

Building Permits (MoM) (JUN)

12:30

3.0%

-4.2%

Building Permits (JUN)

12:30

1035K

963K

Philadelphia Fed. (JUL)

14:00

16.0

23.9

Fed's James Bullard Speaks on Monetary Policy

17:35

Click Here for the DailyFX Calendar

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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