New Zealand Dollar, NZD/USD, AUD/NZD, RBNZ Remit, Technical Analysis - Talking Points
- NZD soars as govt. proposes adding house prices to RBNZ remit
- This has cooled dovish bets, NZD/USD may also rise with stocks
- ‘Risk-neutral’ AUD/NZD down, could extend losses to 61.8% Fib
The New Zealand Dollar is soaring during morning Tuesday Asia Pacific trade after reports crossed the wires that the local government proposed adding housing prices to the central bank’s remit. Finance Minister Grant Robertson is seeking advice on measures to curb housing demand. Housing prices have climbed about 20% from October 2019, raising concerns about inflation in a zero-interest rate environment. The central bank said that it will ‘engage constructively’ on the proposal.
NZD has generally been on an aggressive rise as of late after the Reserve Bank of New Zealand hinted against the use of negative interest rates. Earlier this month, the central bank introduced a Funding for Lending Programme (FLP) to help prepare the economy for a negative rate environment. However, the central bank also highlighted a more resilient economy and stopped short of affirming negative OCR bets.
Today’s announcement by New Zealand’s government further cooled those expectations, sending local government bond yields higher. This is making NZD relatively attractive in markets and may continue doing so in the near term. The sentiment-linked currency may also receive a boost from a rise in equities given recent developments around Covid vaccines and the initiation of a Joe Biden transition in the US.
New Zealand Dollar Technical Analysis
NZD/USD is pushing beyond 2019 highs, aiming to close above the peak from the end of 2018. That would expose the June 2018 high at 0.7060. Maintaining the upside bias appears to be the near-term 20-day Simple Moving Average which could hold in the event of a turn lower towards the 0.6756 – 0.6798 inflection zone.
| Change in | Longs | Shorts | OI |
| Daily | 12% | -8% | 5% |
| Weekly | -15% | 3% | -10% |
NZD/USD Daily Chart
‘Risk-neutral’ AUD/NZD is extending losses beyond lows from July, aiming to break under the midpoint of the Fibonacci retracement at 1.0520. That has exposed the 61.8% level at 1.0397 as the pair aims to reverse the dominant uptrend from March through early August. Immediate resistance could be the former 1.0556 – 1.0598 support zone.
AUD/NZD Daily Chart
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
