NZD/USD Edges Lower As Risk Markets Plummet, TD & BNZ See August Rate Cuts

The kiwi finished the session as one of the worst G10 currencies, down 0.34% at 0.5941. Risk markets plummeted on Monday with Japanese benchmark equities down around 10%, US equities closed down 2-3%, although did look to find at least a temporary floor.

• The NZD/USD is consolidating within the 0.5900-0.6000 range with neutral technical indicators, the currency plunged at one point on Monday as risk markets were selling off, but quickly snapped back to trade back within the range. The RSI is slightly negative at 40, while the MACD indictor is showing increasing bar, indicating no clear short term trend.
• Key support is at 0.5850 (July 5 lows), while resistance is at 0.5978 (20-day EMA). The overall outlook remains neutral to bearish as long we we hold below the 20-day EMA.
• TD Securities anticipates the RBNZ will cut in August and forecast 100bps of cuts this year, lowering the Official Cash Rate to 4.5%, with a 25bps cut in August, a 50bps reduction in October, and a 25bps cut in November, while BNZ now also sees the RBNZ to start cutting in August and no longer in November.
• The OIS market is now fully pricing in a cut at the August meeting,, with 60bps of cumulative cuts in November and 103bps by year-end.
• The NZ-US 2yr swap spread hit 40bps overnight before a 20bps swing and close the session at 20bps, still well off the July lows of -16bps.
• Expiries: 0.5950 ($200.84m), 0.6085 ($260m) August 7 NY cut
• Today the calendar is empty