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NZD/USD Falls on Rate Cut Expectations, China Growth

NZD
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The NZD continues to fall due to increasing expectations of interest rate cuts by the RBNZ, disappointment over China's lack of significant economic stimulus measures, this has also followed a cut in the loan prime rates by the PBoC, while weakness in the commodity sector didn't help.

  • The NZD/USD declined for the fourth straight session, closing down 0.37% to 0.5957 and has now dropped 4.35% from the June highs.
  • There has been weakness in equities post the NY close after Tesla (down 9% in After hours trading) reported an earnings miss which could weigh on risk currencies including the NZD.
  • The pair trades well under all key EMAs, indicating a bearish bias. Technical indicators show continued selling pressure, with RSI at 31 and MACD showing increasing negative bars. A break back above resistance at 0.6000 would be needed to break the short-term trend, while next major support is at 0.5940 (April 1 lows)
  • The OIS market pricing is little changed with a 49.6% chance of a cut in August, the market has priced in a full cut by October and 71bps of cuts into year-end.
  • The NZ-US 2yr swap spread made new lows on Tuesday, hitting -7bps we trade just off those levels now at -5.5bps.
  • Expiries: 0.6300 ($128.57m) for July 24th NY cut
  • The calendar is light on for the remainder of the week.
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The NZD continues to fall due to increasing expectations of interest rate cuts by the RBNZ, disappointment over China's lack of significant economic stimulus measures, this has also followed a cut in the loan prime rates by the PBoC, while weakness in the commodity sector didn't help.

  • The NZD/USD declined for the fourth straight session, closing down 0.37% to 0.5957 and has now dropped 4.35% from the June highs.
  • There has been weakness in equities post the NY close after Tesla (down 9% in After hours trading) reported an earnings miss which could weigh on risk currencies including the NZD.
  • The pair trades well under all key EMAs, indicating a bearish bias. Technical indicators show continued selling pressure, with RSI at 31 and MACD showing increasing negative bars. A break back above resistance at 0.6000 would be needed to break the short-term trend, while next major support is at 0.5940 (April 1 lows)
  • The OIS market pricing is little changed with a 49.6% chance of a cut in August, the market has priced in a full cut by October and 71bps of cuts into year-end.
  • The NZ-US 2yr swap spread made new lows on Tuesday, hitting -7bps we trade just off those levels now at -5.5bps.
  • Expiries: 0.6300 ($128.57m) for July 24th NY cut
  • The calendar is light on for the remainder of the week.