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NZ Dollar Falls as RBNZ Keeps Dovish Stance Despite Upbeat Data

NZ Dollar Falls as RBNZ Keeps Dovish Stance Despite Upbeat Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • RBNZ policy statement remained dovish despite upbeat jobs, CPI data
  • NZ Dollar plunge suggests markets expected a more upbeat outcome
  • NZD/USD short entry order set up, looking for a bounce to trigger trade

Have a question about trading NZD/USD? Join a trading Q&A webinar and ask it live!

The New Zealand Dollar plunged after the RBNZ opted for a dovish posture, as expected. Inflation ticked up in the first quarter and the unemployment rate dropped last month but the central bank's worries about international threats were unlikely to have ebbed.

The New Zealand Dollar plunged after the RBNZ opted for a dovish posture, as expected. Inflation ticked up in the first quarter and the unemployment rate dropped last month but the central bank's worries about international threats were unlikely to have ebbed.

The policy statement confirmed as much, reiterating that the policy stance will remain accommodative for a considerable time yet. Traders seemed to have been looking for a more upbeat posture, with subsequent disappointment translating into a down move that brought NZD/USD below support in play since the beginning of the year.

The case for a short trade looked compelling but risk/reward considerations argued against taking a trade with the pair trading in close proximity to support. With that in mind, an entry order was placed to sell the pair at 0.6863. If triggered, the position will initially target 0.6810 and have a stop-loss activated on a daily close above 0.6890.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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