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(M2) Correction Extends


Late Session Rebound


(M2) Corrective Cycle Remains In Play

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RBNZ Steals Spotlight


The uptick in AUD/NZD seen in the first week of Nov was capped by the 38.2% recovery of the Aug 18 - Oct 30 sell-off at NZ$1.0767. The rate tested NZ$1.0767 on both Nov 5 & Nov 6 and a rejection of that level heralded a pullback towards the 200-DMA. At the same time, the 50-DMA crossed below the 100-DMA, hinting that bears might be taking control.

  • As a reminder, last week the RBA cut its cash rate, 3-Year yield curve & bank lending facility rate to 0.10% from 0.25% and said it will buy A$100bn worth of ACGBs from the 5-10 Year sector over the next six months.
  • The RBNZ picks up the baton today, set to deliver its last MPS this year. New Zealand's central bank is expected to leave the OCR unchanged at 0.25%, while unveiling the details of a new Funding for Lending Programme.
  • The RBNZ's statement released this morning has stirred the pot ahead of the MPS. The Bank delayed the start of bank capital buffer increase by another year to allow lenders to respond to the Covid-19 pandemic, with many wondering if that tells us anything about policymakers' mindset in the run-up to the MonPol decision.
  • More controversially, the RBNZ said it will consult about reinstating LVR restrictions on high risk lending from the beginning of Mar. As we flagged in our RBNZ preview, a rapid increase in house prices has been a worrying head-scratcher for both monetary and fiscal authorities. However, moving ahead with reintroducing LVRs would mean a breach of the RBNZ's earlier commitment not to do so at least until the beginning of May, potentially undermining the credibility of forward guidance on OCR trajectory.
  • With AUD/NZD last sitting virtually unch. at NZ$1.0662, bears look for a dip through the 200-DMA/yesterday's low at NZ$1.0648/42 before taking aim at Oct 30 low & key near-term support at NZ$1.0595. Conversely, a jump above the aforementioned NZ$1.0767 level would signal that bulls are retaking control.

MNI London Bureau | +44 203-865-3806 |
MNI London Bureau | +44 203-865-3806 |

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