The NZDUSD has pushed lower in NY trading session. The price high stalled at the 100/200 hour MA levels (blue and green line in the chart below). The currency pair was supported – up until that point – by the carry trade buyers. Rates in NZD remain higher leading to rollover/carry profits for traders long the pair.
The NZDUSD has reversed in the NY session.
The RBNZ this week warned that the currency remained high and was due for a significant drop. They also took back the comment that rates would likely need to rise further to slow inflation. Inflation in the last quarter came in weaker, so they are feeling that inflation will not require more tightening.
They did not intervene much in the period leading up to this meeting, but did a fair amount of in the period before the September meeting. You wonder with the BOJ and the EUR starting to go full speed ahead with additional stimulus, if the RBNZ will feel a need to control the rise in their currency. More intervention perhaps? Currency wars are heating up.
The RBNZ has the dilemma of being the lone wolf who has raised rates. It is hard to raise rates, have higher rates, and look for a lower currency at the same time. The thing that might feed a lower move is therefore intervention that is meaningful, and traders getting too “carry traded” up.
Technically, the low from yesterday and on Wednesday comes in at the 0.7765 level. The pair fell below the trend line connecting the hourly lows before Wednesday/Thursday central bank plunge (at 0.7826). That trend line has been a dividing line for bullish and bearish in the last 24 hours of trading and will remain a risk defining level for shorts now.
Looking at the 5 minute chart below, the pair the 38.2%-50% of the move down from the high comes in at 0.78186-0.78301. The 0.7826 trend line from the hourly chart comes in this area. Going forward, this increases that area as a technical level to follow. If buying, you want to see the price move back above this level. There can be moves lower still, but watch for the snap backs off support levels from the carry trading dip buyers.
The 5 minute chart in the NZDUSD has reversed the early action. 0.7818 is resistance now.
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