Kiwi slips lower ahead of Thursday's OCR meeting

Kiwi slips lower ahead of Thursday's OCR meeting

By Andrew May (Sales Trader, CMC Markets New Zealand)

The New Zealand dollar is fighting to keep its head above US 82.60c prior to the official NZ Reserve Bank cash announcement due Thursday morning. Now purposefully in retreat mode from recent six month highs, the NZDUSD finds itself corrected and is currently trading US 82.65c.

Of course downward selling pressure was to be somewhat expected after the ‘surprise’ tightening of liquidity streams the Chinese banks experienced last week, however the downward trend has persisted since NZ traders returned from yesterday’s NZ Labour Day, to find the clear possibility that the Kiwi could potentially fall further.

In Australia, comments also made yesterday from RBA Governor Glenn Stevens regarding an ‘intervention’ to a worrisome high AUD pushed the Aussie dollar down almost 1%. The NZD fell in a sympathetic unison shadowing a fall lower. Broad based Greenback strength resumed, in which saw cross rates fall across the board due to traders no doubt squaring USD short positions ahead of tomorrow’s FOMC minutes.

So tomorrow has the potential for a ‘trick or treat’ surprise for traders holding the NZD. On one hand there could be defined re-entry levels to buy and hold the Kiwi as market consensus is for a ‘no change’ mandate to an already set-in-stone benchmark 2.5% cash rate. There is also the eagerly anticipated commentary at the close of the two-day US FOMC meeting that should at least indicate a proposed time frame to tapering the current QE programme to sometime next year.

However with AUD and NZD still highly overbought and with month-end approaching, another round of profit taking could well be on the cards, especially if commentary from the RBNZ signifies concerns for a high Kiwi dollar alongside a less ‘dovish’ than expected approach from the Federal Reserve, which would provide a ‘shot in the arm’ for the Greenback.
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