Kiwi rises from abyss in spite of policy easing

Kiwi or the New Zealand dollar is among the top performer today as it is up 0.95% so far in spite of 25 basis points rate cut by Reserve Bank of New Zealand (RBNZ).

• This clearly indicates that market participants were expecting more aggressive RBNZ, with some analysts calling for a 50 basis points rate cut.
• Moreover New Zealand dollar has clearly been oversold.
• 0.65 level is now proven as a crucial mark, which will not be easy for the bears to break.

Key highlights from RBNZ -

• RBNZ views global growth as moderate and takes note of heightened uncertainty in relation to Greece in Europe (not explicitly mentioned) and China. According to RBNZ, uncertainty remains regarding the impact of FED rate hike.

• Inflation is likely to move towards 2% by early 2016, due to currency depreciation.

• RBNZ welcomed currency depreciation but feels further depreciation as necessary.

• RBNZ remains committed to dovish monetary policy saying further rate cut is likely.

Next RBNZ meeting is scheduled in September. In the meantime Kiwi might consolidate or take cue from dollar leg.

As suggested, it might even appreciated against Aussie dollar and reach 1.07 mark for AUD/NZD pair.

Trade idea -

• Speculative long position in NZD/USD can be taken with target around 0.69, however this trade is against fundamental and as medium to longer term we remain committed to target around 0.56/55. However profit booking on short call is suggested as price target at 0.65 is reached.
  
  
• Better opportunity may arise later to go short in NZD/USD.
  
  
• Short AUD/NZD pair, with target around 1.07 area and stop at recent high around 1.14.