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RBNZ Remains Steady, EUR Poised To Strengthen Upon German Gov't Agreement

Published 02/07/2018, 05:19 AM
Updated 12/18/2019, 06:45 AM


RBNZ: Steady as she goes

  • RBNZ is to announce its interest rate tonight at 20:00 (GMT) and is expected to remain on hold at +1.75%. The market has priced in the probability to remain on hold at 99.88% and the financial data also support the case as the inflation is currently at +1.6%, below RBNZ’s target range of 2-3%. The focus should shift to the accompanying statement and specifically to the inflation rate which has recently dropped. Another point to keep a look out for would be the recent strengthening of the NZD. Overall, the statement could have a positive economic outlook, however, due to the factors mentioned before we see the case for a cautious comment about the future rate hike path. NZD could weaken as the statement could be neutral to dovish.
  • NZD/USD yesterday, regained any losses it suffered due to the US stock market mini-crash and continued to trade in a sideways manner staying between the 0.7370 (R1) resistance level and the 0.7250 (S1) support level. We see the case for the pair to continue in a sideways manner with a bearish tone in the short term as the fundamentals suggest. Should the bulls take the driver’s seat we could see the pair breaking the 0.7370 (R1) resistance line and aim for the 0.7417 (R2) resistance hurdle. On the other hand, should the bears have the upper hand we could see the pair breaking the 0.7250 (S1) support level and aim for the 0.7180 (S2) support barrier.

German coalition partners: Painful compromises

  • German parties have been negotiating hard and long in order to form a government coalition in the past few days. German Chancellor Merkel stated that all of the parties involved in the coalition negotiations will have to make painful compromises. CDU currently seems to lack leverage on the negotiating table and we could see it making more painful compromises than the SPD on the issues of temporary workers and healthcare. SPD officials on the other side, seem to be confident that they are on the right track, however, work still needs to be done. We see the case for the partners to reach an agreement at any given moment until the end of the week and for the EUR to strengthen upon announcement of the agreement.
  • The EUR/USD moved in a sideways manner yesterday testing the 1.2355 (S1) support line. We see the case for the pair to continue to trade in a sideways manner in the short term and it may experience some bullish pressures as the US stock market stabilizes even further. Should the pair find new selling orders we could see it breaking the 1.2355 (S1) support line and aim for the 1.2230 (S2) support area. On the other hand, should the pair find buying orders, we could see it breaking the 1.2495 (R1) resistance line aim for the 1.2600 (R2) resistance level.

As for today’s other economic highlights:


NZD/USDNZD/USD 07/02/18

Support: 0.7250(S1), 0.7180(S2), 0.7110(S3)
Resistance: 0.7370(R1), 0.7417(R2), 0.7461(R3)


EUR/USD
EUR/USD 07/02/18

Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)
Resistance: 1.2495 (R1), 1.2600 (R2), 1.2770 (R3)

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