NZD/USD Edges Higher As Equities Rally

The NZD/USD continued its move higher on Thursday, risk markets rallied overnight post lower than expected jobless claims data. There is little on the calendar until the RBNZ meets on Wednesday, where there market is now expecting more likely than not that they will cut rates.

• The NZD/USD finished 0.32% higher at 0.6014, and at session's bests. The pair was trading lower into the US session, but lower-than-expected US jobless claims caused a rallying in risk markets with the S&P 500 having its best day since Nov 2022.
• The RBNZ looks more likely than not to cut rates at the August 14 meeting according to the OIS market with august OIS pricing in about a 75% although this is down from a fully priced in cut on Monday, the market is also pricing in 92bps of cuts into year-end.
• Expectations for 1yr annual inflation fell to 2.40% from 2.73%, while those for 2yr fell to 2.03% from 2.33%.
• Initial support is 0.5987 (20-day EMA), with a break here opening a move to 0.5913 (Aug 6 lows with major support at 0.5850 (Aug 5 lows). Initial resistance is 0.6025-30 (Aug 7 highs/50-day EMA).
• The short-term technical outlook remains neutral to slightly bullish as long we we hold above the 20-day EMA, the 14-day RSI is now 52, after reaching multi year lows of 24 late July, while the MACD indictor is now showing increasing green bars.
• The NZ-US 2yr swap spread reached a high of 35bps on Thursday, before a sharp reversal saw it drop 20bps to trade at 14bps this morning
• Today, the calendar is empty focus will be on China PPI & CPI