NZD loses ground in all crosses

The NZD has been the highlight of trade in Asia today after the RBNZ decided to hike rates for a fourth consecutive meeting. 

Source: Bloomberg

While the market was firmly expecting another hike, the statement managed to catch some traders unaware. The bank said rates will now be held for a period, but further tightening is likely over time. The RBNZ feels the economy is showing signs of adjusting to the tightening and as a result this warrants some assessment before further tightening.

Analysts feel it is unlikely we’ll see further tightening before December. This has resulted in a significant unwind of the NZD as the market seems to have been overly long the currency. NZD/USD dropped to a one-month low, but managed to hold on to the 0.8600 handle. However, momentum seems to be firmly to the downside and we could see the pair come under further selling pressure through Asian trade.

NZD/AUD has seen an even sharper drop considering the fundamentals of the AUD over the past few days. Following this morning’s rate decision, the pair has slipped to around 0.9104 and could be looking to extend losses in the near term. There is some support in the 0.9060 region and until there I don’t see any key levels that could prevent further losses.

AUD/USD got a minor lift on the back of China’s HSBC manufacturing PMI reading and this added on to the kicker from yesterday’s CPI reading. China’s HSBC manufacturing PMI reading came in at 52, well ahead of estimates of around 51. This has pushed the pair into the upper Bollinger band which could turn out to be a sell zone for some traders. However, given the significant shift in fundamentals for the AUD over the past few days and the buoyant risk environment, shorts could be out of favour in the near term. Aggressive traders could be eyeing a move into 0.9500 (early July highs) in the near term. 

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.