RBNZ Cuts Rates:
Down under, the Reserve Bank of New Zealand cut interest rates first thing in Asia, surprising market expectations and slashing the cash rate by 25bp from 3.50% to 3.25%.
“We expect further easing may be appropriate. This will depend on the emerging data.”
The final sentence in the Monetary Policy Statement that accompanied the release hints that the kiwi might not be done with cuts just yet, also adopting a clear easing bias.
NZD/USD Daily:
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NZD/USD 4 Hourly:
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The technicals lined up perfectly for this one, with Wheeler’s jawboning over the last few weeks breaking major support, before USD weakness saw price retest the broken support level as resistance, before the cut took us to new lows.
Kuroda Jawbone’s the Yen:
The other major story line that is almost forgotten in the midst of the kiwi central bank action was Kuroda’s jawboning of the yen, pushing USD/JPY to its largest decline since 2013.
“Unlikely for yen to weaken further in terms of real effective rate.”
The yen got absolutely hammered on the comments, but the question you have to ask yourself is does it have any real bearing on monetary policy from the BoJ? QE certainly won’t be unwound anytime soon with the economy not outperforming by any stretch.
Could be an opportunity to fade it if you are still a USD bull.
USD/JPY Daily:
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On the daily, we see a big squeeze off highs with long positions getting obliterated.
USD/JPY 4 Hourly:
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We can see that price hasn’t yet troubled the previous support/resistance zone that we have marked on the charts, and so long as we are above this level, it’s really just a healthy correction off the top.
If you buy into the fundamental story that Kuroda’s comments don’t have any strength behind them, then this move is just weak longs getting blown out of the market before the real move higher again.
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On the Calendar Today:
The RBNZ surprising markets by cutting interest rates by 25bp to 3.25% early this morning is only an Asian session appetiser (although a pretty good one if you were short!) for the rest of the day, with tier 1 data still to be released from both Australia and China.
We then have to wait for the US session for any other major market moving releases, with retail sales and unemployment claims coming out of America. Governor Poloz from the Bank of Canada caps off the deluge of calendar action on the day, so stay alert if you’re holding any CAD positions overnight.
Thursday:
NZD Official Cash Rate (3.25% v 3.50% expected)
AUD Employment Change
AUD Unemployment Rate
CNY Industrial Production
USD Core Retail Sales
USD Retail Sales
USD Unemployment Claims
CAD BOC Gov Poloz Speaks
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