NZD: After seeing a sharp reversal in yesterday’s session with market participants buying the dip in NZD, the currency is once again heading higher and currently outperforming the rest of the G10 complex with RBNZ officials reiterating that rate hikes are coming. The latest hawkish commentary came from the Assistant Governor who stated that last week, the Bank had considered a 50bps rate hike adding that they decided to hold rates due to the communication challenge and not the economic risks. That being said, while money markets are 50/50 as to whether the RBNZ hikes are its October meeting, this will largely depend on the Covid backdrop, in which a situation similar to Australia may well force the RBNZ to refrain from raising rates.
NZ New Covid Cases
Source: JHU CSSE Covid-19 Data
NZD/USD: Looking at the chart, near term resistance for NZD/USD resides at 0.6950-60 with the psychological 0.70 handle above, which also sits at a congested zone and thus may be difficult to breach on its first attempt. While on the technical front, the RSI will need to close above 50 to give bull an encouraging signal to push higher.
A Guide to Support and Resistance Trading
NZD/USD Chart: Daily Time Frame
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | -5% | -3% | -5% |
| Weekly | 20% | -31% | 1% |
EUR/NZD: Having hit multi-month highs during the pullback in risk appetite, the renewed upside in the equity space has subsequently prompted EUR/NZD to correct lower. What’s more, with the RBNZ providing a reminder of its intention to raise rates, focus can return to policy tightening and the divergence between the ECB and RBNZ. Therefore, with the German-NZ Spreads pointing to a lower EUR/NZD, risks remain lower, provided risk sentiment remains stable. Regarding short term support, the 100 & 200DMA sits at 1.6875-77.
DE/NZ 10Y Bond Spread vs EUR/NZD
Source: Refinitiv
EUR/NZD Chart: Daily Time Frame
Source: Refinitv
